Increase in Base Pay for Pennsylvania Tipped Workers Starts Friday

A new regulation that will raise the base pay of tipped workers, limit tip pooling, and prevent employers from subtracting credit card transaction fees from workers’ tips was approved in March and goes into effect Friday.

Starting Friday, tipped workers in Pennsylvania will see a little boost in their pay.

The Independent Regulatory Review Commission unanimously approved a regulation request from the Department of Labor & Industry to raise the pay of tipped workers by updating the tip threshold. 

The commission’s decision to establish a new threshold in March updated a rule dating back to 1977 about how employers pay tipped workers. Employers in Pennsylvania were required to pay at least $2.83 an hour, a level that bumps up to minimum wage if an employee’s tips don’t meet a certain threshold. The updated tip threshold, along with other changes, takes effect Friday.

While the changes are modest, they will give low paid hourly workers a little more income but not impose significant burdens on employers.

The approved changes include the following:

Updating the Tip Threshold

The regulation updates the definition of a “tipped employee.” Adjusting for inflation since 1977, it increases the amount in tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly pay from $7.25 per hour to as low as $2.83 per hour.

The new threshold will ensure that low-paid workers in industries in which tips are occasional and a small supplement to hourly wages receive a predictable paycheck each period.

80/20 Rule

Alignment with a federal regulation that says workers cannot be paid the tipped minimum wage unless they spend at least 80% of their workday performing tipped work. 

Limiting Tip Pooling

Tip pooling is the group collection and equal redistribution of tips among workers. This change allows for tip pooling among employees but in most cases excludes managers, supervisors, and other business owners. More tips, as a result, will go to lower-paid employees.

Credit Card Fees

This change prohibits employers from deducting credit card processing fees from a workers’ credit card tips.

Gratuity Clarification

A requirement for employers to inform a patron what part of a bill is a tip/gratuity that goes to the workers and what part of the bill is a service fee that goes to the employer.

“Regular Rate” Definition Update

This update clarifies that salaried employees who are entitled to overtime wages should be paid time-and-a-half overtime based on their salary and other compensation divided by 40 hours.