If you tip your server in Pennsylvania on Friday, she or he might get to keep more of it and the cumulative amount might affect hourly wages.
A new law taking effect increases the amount of money an employee will receive when they get a tip paid with a credit card.
Employers pay fees to credit card companies for using the payment services.
Employers could deduct credit card fees from the tip amount
Previously, if a server received a $20 tip on a credit card, a typical fee paid to the card company would be 2% and the employer could legally deduct that amount – 40 cents – from the employee’s tip. The law now makes it illegal for employers to deduct credit card transaction fees from employee tips.
New law also allows a lower wage to be paid
The new law also changes the “tip credit” businesses are allowed. The credit allows businesses to pay employees a wage lower than the minimum wage if employees receive tips. In Pennsylvania, the minimum wage is the same as the federal minimum wage of $7.25 an hour. The maximum “tip credit” a Pennsylvania business can claim is $4.42 an hour, resulting in an employee wage of $2.83 an hour, plus tips.
The new law increases the “tip credit” threshold for lowering the employees’ wage from $30 in tips per month to $135.
What is a tipped worker?
To be considered a “tipped worker,” the employee isn’t allowed to perform more than 20% of their tasks not directly generating tips. If an employee doesn’t meet the definition of a “tipped worker” and doesn’t receive $135 per month in tips, the employer can’t pay less than the minimum wage of $7.25 an hour.
Other changes
The new law also will change how businesses bill customers for service charges. Businesses charging for the administration of a banquet, special function or a package of services must notify customers of any service or administrative charges on a contract or a menu.
The business must inform customers the service or administrative charges is not a tip to be distributed to employees. Bills must have a separate line item for tips. The law allows employers to distribute service or administrative charges to workers but not in the form of a tip.
Pennsylvania Democratic Gov. Tom Wolf in January challenged legislators to raise the state’s minimum wage to $12 an hour and annually increase it 50 cents per hour until it reaches $15 an hour in 2028.
Thirty states, including all states surrounding Pennsylvania, have minimum wages higher than $7.25 an hour.
