Tips on a new Pennsylvania law and rewarding your hospitality workers

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. 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.

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.

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.

The new law also will change how businesses bill customers for service charges. Businesses charging for 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.

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