Please note: We are not a legal firm and do not provide legal advice. This article is for informational purposes only. Consult with a qualified attorney before implementing any practices discussed herein.
Tipping is an essential part of the service industry, and Pennsylvania has specific laws governing how tips are handled, who qualifies as a tipped employee, and how tip pooling and service charges work. Whether you're a restaurant owner, a tipped worker, or simply someone curious about tipping regulations, this guide breaks down everything you need to know.
Under federal law, all employees are entitled to earn at least the minimum wage of $7.25 per hour. Pennsylvania follows this federal standard, meaning tipped employees must still make at least this amount when combining their base wages and tips.
Pennsylvania allows employers to take a tip credit, meaning they can pay tipped employees a lower base wage as long as their tips make up the difference to meet the minimum wage. Employers can take a tip credit of up to $4.42 per hour, which means tipped employees must be paid at least $2.83 per hour in base wages. If an employee’s tips do not bring their earnings up to $7.25 per hour, the employer must cover the shortfall.
Tipping laws in Pennsylvania include the 80/20 rule, which states that tipped employees must spend at least 80% of their work time on tip-generating activities. If they spend more than 20% of their time on non-tipped tasks, they must be paid the full minimum wage for that time.
Additionally, an employee must earn at least $135 in tips per month to be classified as a tipped employee and qualify for a tip credit.
Pennsylvania permits tip pooling, where employees contribute a portion of their tips to be redistributed among other tipped employees. However, there are strict rules about who can be included in a tip pool:
Employers must notify employees if they will be participating in a tip pool, and employees cannot be required to contribute more than what is considered customary and reasonable.
Related reading: Tip Pooling vs. Tip Sharing: Which is Right for Your Restaurant?
Some restaurants and event venues add a mandatory service charge to customers’ bills for large parties, private events, or catered services. It’s important to note that:
This means that even if a customer assumes a service charge is going to their server, there is no legal requirement for that money to be passed on to employees.
Unlike some states, Pennsylvania law prohibits employers from deducting credit card processing fees from employees’ tips. This means that if a customer tips using a credit card, the employee is entitled to receive the full tip amount, regardless of any fees the business incurs from credit card companies.
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Tipped employees in Pennsylvania have legal protections under both state and federal laws. Employers must:
Employees who believe their tipping rights have been violated can file a complaint with the Pennsylvania Department of Labor and Industry or the U.S. Department of Labor.
There's more information on tipping laws at the U.S. Department of Labor (DoL) site.
Understanding Pennsylvania's tipping laws can be complex, but TipHaus makes it easy for businesses to stay compliant while ensuring fair compensation for employees. If you’re looking for a way to automate tip management and streamline payroll, we can help. Contact TipHaus today to learn more about our solutions for modern tip distribution!
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