Employment laws, and particularly minimum wage laws in the United States are not always clear or straightforward to understand, especially when you are looking at the tipped minimum wage, and what tipped employees in Pennsylvania should be paid.
Workers at restaurants, bars, hotels, airports, cafes, and other service providers often expect to be paid a relatively small hourly wage supplemented heavily by tips (gratuities). Many service-industry workers in Pennsylvania base their entire pay on tips and rely on them to cover their living expenses and lifestyle.
What is a Tipped Pennsylvania Employee?
A tipped worker in Pennsylvania is somebody who earns their wages through tips rather than a fixed salary or higher per hour rate that meets or exceeds the minimum wage in the state. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.
In Pennsylvania, if an employee receives more than $30 or more per month in tips, they are considered to be a tipped employee by federal standards. These employees often include workers such as bartenders, servers in Pennsylvania, some hotel workers (like bellhops and porters), valet car parking attendants, and more. The laws surrounding the definition of a Pennsylvania tipped employee follow the federal guidelines.
Tipped Employees – Pennsylvania Tipped Minimum Wage
To comply with Pennsylvania minimum wage laws, employers must ensure that when including tips, their employees that are 18 years of age or older are being paid at the very least the state minimum wage rate set for Pennsylvania tipped workers, which is the same as the federal minimum wage and, also known as the Pennsylvania tipped minimum wage for employees.
If these tipped employees are not making the minimum pay rate, it is then the employer’s responsibility to make up the difference of the regular minimum wage of $7.25 per hour – the difference between $2.83 per hour and $7.25 per hour ($4.42).
There are many factors that contribute to the employment law in Pennsylvania that will impact how employers handle tipped employees. Understanding the standard minimum wage in Pennsylvania, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal if you are considering starting a service-related business with tipped employees.
The tipped minimum wage in Pennsylvania for 2022 is $2.83 per hour. The current minimum wage in Pennsylvania in 2022 for those over the age of 18 years old is $7.25 per hour for non-tipped employees.
If an employee works more than 40-hours per week then they may be entitled to be paid overtime. This is called “time and a half pay” and is equal to one and a half times (1.5) an employee’s normal hourly wage.
Fair Labor Standards Act (FLSA) and Tipped Employees
The Federal Fair Labor Standards Act, also known as the FLSA, is a federal law from the U.S. Department of Labor. This law establishes a national minimum wage, defines classifications for employees, and covers other essential standards and requirements for Pennsylvania employers.
Federal law requires that employers make tipped employees aware of the cash wage paid. They must also let them know about the tip credit, and explain any tip pooling systems at the workplace. Currently, the minimum cash wage for employees in Pennsylvania is $2.83 per hour, which is $0.70 per hour more than the national tipped rate of just $2.13 per hour.
Tip Credits and the Minimum Cash Wage in Pennsylvania
Since the rules for tipped employees are different than non-tipped employees, there are other ways that employers can calculate the minimum amount earned by a tipped employee. One of these ways is through tip credits.
The Pennsylvania tip credit is is currently $4.42 per hour – this means that employers can claim up to a $4.42 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $7.25 minimum wage into a $2.83 per hour tipped minimum wage that employers must pay to tipped employees no matter how much they earn in tips.
Let’s assume a tipped employee in Pennsylvania earns, on average, less than $4.42 per hour during the working week as the tipped portion of their earnings (an accumulation of their tips). In that case, the employer must pay the difference between the minimum cash wage ($2.83 per hour) that they made in tips per hour in a working week and the total of $7.25 per hour. This is tipped credit against the minimum wage.
A minimum cash wage ensures that Pennsylvania tipped employees earn a fair wage, even if a slow workweek or other downturn occurs and they do not receive sufficient tips in a certain week or pay period. This tipped credit against the minimum wage rate ensures that servers and others in tipped roles in Pennsylvania that do not make enough with tips can still earn a weekly wage when working full-time of at least $290 ($7.25 x 40 hours).
Alternatively, some tipped employees in Pennsylvania will work more than 40 hours per week, especially if they are covering shifts for other employees, and may qualify for overtime pay. The table below is displaying the current and previous Pennsylvania tipped minimum wage rates.
| State | Tipped Wage | Tip Credit | Year |
|---|---|---|---|
| Pennsylvania tipped minimum wage 2022 | $2.83 | $4.42 | 2022 |
| Pennsylvania tipped minimum wage 2021 | $2.83 | $4.42 | 2021 |
| Pennsylvania tipped minimum wage 2020 | $2.83 | $4.42 | 2020 |
| Pennsylvania tipped minimum wage 2019 | $2.83 | $4.42 | 2019 |
How Does This Affect My Business?
If you are planning to start (or purchase) a new business in Pennsylvania due to the plethora of brilliant small business opportunities in the Keystone State, or simply considering Pennsylvania as a place to live and work, you should certainly take this information about tipped employees and the state minimum wage into account.
While you may want to speak with an employment attorney or accounting firm for legal and tax advice about your business, understanding the minimum wage laws for tipped employees can help you make an informed decision whether or not the state is right for you and your future plans.
If you have a claim related to employment, you can find out more information on the Pennsylvania Department of Labor and Industry website. You can also file a complaint if you feel you are not being paid the correct minimum wage or overtime rate.
