Pennsylvania Raising Tip Threshold for Tipped Worker Minimum Wage

An Independent Regulatory Review Committee on Monday unanimously approved a proposal by the Wolf administration to raise the tip threshold for tipped worker minimum wage. The new rule could take effect in the coming months and would primarily impact restaurants and their employees.

Currently, restaurant workers can be paid an hourly wage rate of less than the state’s minimum wage of $7.25, to as low as $2.83 an hour, as long as they make at least $30 a month in tips. 

It should be noted that the hourly wage, when combined with tips received, must equate to at least the $7.25 state minimum wage. An employee that does not receive the required minimum wage when their hourly wage is combined with tips received is required to be equalized to at least the $7.25 minimum wage rate.

Under the newly approved rule, for a tipped employee to have an hourly wage rate of less than $7.25 an hour, they must make at least $135 a month in tips, a $105 increase meant to adjust for inflation from the last 45 years. 

It’s not currently clear how the hourly wage rate should be handled if tips received were to fluctuate above and below the threshold from month-to-month.

Pennsylvania regulations are also being updated to conform to federal guidance on who can be classified as a tipped employee. Under the new rule, an employee must spend at least 80% of their time on tipped work. Employees who do not meet that threshold cannot be classified as a tipped employee and must be paid the $7.25 an hour minimum wage rate.

It’s estimated that there are between 93,000 and 160,000 workers in Pennsylvania who are currently paid a tipped minimum wage of below $7.25 an hour. 

If you have any questions, do not hesitate to contact a member of the Schneider Downs team.