Are you wondering what the legalities around tipping in Virginia look like? Well, search no further. We have everything you need to know about handling tipped employees in Virginia right here. From tip credit to service charges, here is our guide to tipping in Virginia for business owners of all sizes.
Under federal law, tipped employees are guaranteed a $2.13 per hour minimum wage, apart from any income from tips they receive. While many states pay tipped employees more, employers in Virginia are only required to pay this minimum to their tipped employees. But this is only if that amount plus their tipped earnings equals more than the Virginia state minimum wage of $12.41 per hour (effective January 1, 2025).
The state of Virginia also allows employers to deduct tip credits against their employees' earnings. This rule means that some of the employees' earned tips can be used to pay their hourly wage. If the tipped employee earns less than $12.41 per hour from both tips and their hourly minimum wage, tip credits cannot be deducted from their tipped earnings.
Federal Law mandates a maximum tip credit per hour that employers can deduct from their employees' wages of $5.12. This ensures that tipped employees always earn the minimum wage, no matter how much or little they make in tips in a given shift or pay period
So, can owners take tips?
In the context of Virginia’s tipping laws, owners cannot take tips. Tipped employees are entitled to their tips, and while employers can require tip pooling, they cannot take any portion of the tips for themselves.
Virginia law allows employers to implement tip pooling, where tips are shared among employees who support the tipped employees’ work, such as servers sharing with busboys or kitchen staff. However, the employer (or owner) is prohibited from taking part in the tip pool or collecting any portion of the tips, even if they are involved in the business operations.
The tips belong to the employees who earned them, and the employer must ensure employees are compensated at or above the state’s minimum wage, which is $12.41 as of 2025, even if the tips don’t reach that amount.
Virginia is one of many states that have tipping pool laws, which allow employers to require tipped employees to share their tips. Tip pooling often utilizes digital payouts, and tipping software usually has automatic tip-pooling features.
Tip pooling means that every tipped employee puts their earned tips into a shared pool at the end of their shift. Tip pooling laws allow these tips to be shared among other employees, both tipped and non-tipped, as long as they support the work of the tipped employee.
Tips received by waiters, for example, can be pooled and shared with busboys or kitchen staff. Owners are not allowed to dip into the tip pool themselves.
Tip pooling can be voluntary or mandatory, and Virginia law allows for the latter. However, employers must notify employees of tip pooling practices in advance.
If tips received by employees are shared among the other staff members, the employer must also make sure the tipped employee still makes $12.41 an hour. If the employer claims a tip credit, only the employees who receive tips can receive a part of the pooled tips.
Mandatory service charges are another way that tips are collected. What is a service charge? When certain conditions exist, especially for dining parties over five or six persons or for large catered events, businesses often add a service charge.
According to Virginia state law, tips received are different than service charges. In fact, an employer is not required to distribute this service charge to employees unless it is part of a specific tip to a specific employee, like a waiter.
Many employees distribute all or part of these service charges to their employees, but there is no legal obligation to do so. Catering business owners often use these service charges to pay their employees' hourly wages.
The IRS has ruled that service charges are wages, not tips. This ruling means employers cannot use them for tip credits and must pay taxes if they use them to pay their employees.
Virginia state tipping laws only apply to mandatory service charges. If the service charge is voluntary, it is counted as a tip received by the employees, can be part of collected tips, and can be leveraged for tip credit.
Conversations about tipping in Virginia get complicated by credit card processing fees, so let's clear this up. Many states prohibit employers from using tips received, or collected tips, to pay credit card processing fees.
Virginia does not have specific laws that prohibit this practice. If tips are pooled, credit card fees are deducted from the entire amount before digital payouts are made to each employee.
Keep in mind that employers can only deduct from tips received the same amount that the credit card company charged as a processing fee. For example, if the credit card company charges an extra 4 percent for the transaction, no more than 4 percent can be taken from the collected tips or the digital payout.
Just like all workers, tipped employers have rights that cannot be infringed on. Tipping in Virginia is a common practice, meaning many employees receive more of their earned salary from customers than their employers. However, the employer is still responsible for protecting basic rights.
Tip pooling laws keep owners from unjustly taking tips for themselves, and tip credit procedures are tightly regulated. Many employers mistakenly believe they can do whatever they want with employee tips, especially pooled tips, but that is untrue.
Remember that the state of Virginia has a minimum wage guarantee that makes it mandatory for employers to pay their workers at least $12.41 an hour, even if they don't make this much in tips during a shift or pay period. Tipping software that keeps track of tips received, pooled tips, and actual hourly wage may be necessary to stay on top of legal requirements.
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