Pennsylvania's new, expanded tipped wage threshold will increase starting Friday, Aug. 5, according to the state.

The new regulations change how employers pay tipped workers and ensures salaried employees with fluctuating schedules are paid for overtime.

Here's what it means for workers and employers:

  • An update to the definition of “tipped employee,” adjusted for inflation since 1977, that increases the amount in tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly wage from $7.25 per hour to as low as $2.83 per hour.
  • Alignment with new federal regulations codifying long-standing policies that govern employer tip credits to allow employers to take a tip credit under certain conditions, including that the employee spends at least 80 percent of their time on duties that directly generate tips, commonly known as the 80/20 rule.
  • Alignment with updated federal regulations that allow for tip pooling among employees but in most cases excluding managers, supervisors, and business owners.
  • A prohibition on employers deducting credit card and other non-cash payment processing transaction fees from an employee’s tip included with a credit card payment or other non-cash method of payment.
  • A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.

It also updates the definition of “regular rate” for salaried employees whose overtime pay is determined by the fluctuating workweek method, clarifying that for the purpose of calculating overtime the regular rate is based on a 40-hour work week.

The new regulations are part of an executive order signed by Gov. Tom Wolf in October 2021.

Gov. Wolf wants lawmakers to raise Pennsylvania’s minimum wage to $12 per hour with a path to a $15 hourly wage.