North Carolina Tip-Pooling and Tip-Credit Rules

North Carolina Tip-Pooling and Tip-Credit Rules: Key Takeaways

Employers may pay tipped employees a base wage of $2.13/hr if combined tips reach the federal minimum wage of $7.25/hr.
Tip pooling is allowed but only among employees who customarily receive tips; managers and non-tipped staff are excluded.
Employees’ tips cannot be reduced by more than 15% in a tip pool, and employers must keep clear records and communicate policies.

Understanding North Carolina tip-pooling and tip-credit rules is essential for employers to ensure compliance and fair wages.

This guide covers key regulations and best practices under federal and North Carolina state law.

For easier calculations, use this tip pooling template.

1. Understanding North Carolina Tip Credit Rules

North Carolina follows federal standards under the Fair Labor Standards Act (FLSA) regarding tip credits.

Employers can pay a minimum cash wage of $2.13/hr to tipped employees, but the sum of wages plus tips must meet or exceed the federal minimum wage of $7.25/hr.

Review current server minimum wage to align your pay policies.

If employees’ tips fall short, employers are required to make up the difference so workers earn at least $7.25 per hour total.

Before taking a tip credit, employers must inform employees about:

The cash wage amount.
The tip credit allowance being claimed.
The requirement that employees keep all tips, except for money pooled in valid tip-sharing arrangements.

2. Tip Pooling Rules in North Carolina

Tip pooling is permitted by North Carolina law under strict conditions to protect tipped employees’ earnings.

Eligible Participants in North Carolina Tip Pools

Only employees who customarily and regularly receive tips—such as servers and bartenders—may participate in and contribute to a tip pool.

Explore the server job description to clarify front-of-house responsibilities.

Managers, supervisors, and non-tipped staff may not be included or benefit from tip pools.

Review the busser job description to define support roles that often share in tip pools.

Contribution Limits for Tip Pooling

Employee tips cannot be reduced by more than 15% under any tip pooling system.

This limit helps ensure workers retain the majority of their gratuities.

Consider using tip pooling apps to automate fair distributions.

Employer Responsibilities for Tip Pooling Compliance

Employers must clearly communicate the tip pooling policy to all participating employees.

They also need to maintain accurate and detailed records of tips collected and how they are distributed among eligible employees.

Use the bartender job description to set expectations for bar staff participating in tip pools.

3. Additional Considerations for North Carolina Tip Management

Service Charges vs Tips

Mandatory service charges added by employers are not tips and legally belong to the employer.

For a payment to qualify as a tip, it must be voluntary, with customers deciding the amount and recipient.

Understand owner tip rules before implementing service charges.

Credit Card Processing Fees and Tip Deductions

Employers may deduct credit card processing fees from employees’ tips, but only if such deductions do not reduce total earnings below the federal minimum wage.

Learn how to reduce processing fees without risking compliance.

Record-Keeping Requirements for Tips

Employer records should include all tips reported by employees, along with amounts and dates.

See the cocktail server job description to document tip-reporting expectations.

If tip pooling is in place, records need to document the arrangement and how tips are distributed among eligible staff.

4. Best Practices for North Carolina Tip-Pooling and Tip-Credit Compliance

Provide clear written notice of tip credit policies to tipped employees before wages begin.
Maintain precise records of all tips reported and pooled funds distributed.
Establish written tip pooling policies outlining who participates and how tips are shared.
Monitor wages regularly to guarantee combined pay meets or exceeds $7.25 per hour.
Prohibit managers and supervisors from participating in tip pools to avoid violations.

5. North Carolina Tip-Pooling and Tip-Credit Resources

For official guidance and updates, visit:

North Carolina Tip-Pooling and Tip-Credit Rules: Compliance Guide Conclusion

Employers in North Carolina must adhere to federal and state regulations when managing tips and tip credits.

By properly notifying employees, following strict tip pooling participant rules, maintaining accurate records, and ensuring base wages plus tips meet minimum wage standards, employers can remain compliant and support fair compensation.

01. What is the minimum cash wage for tipped employees in North Carolina?

Employers may pay tipped employees a minimum cash wage of $2.13 per hour as long as tips plus wages meet or exceed the federal minimum wage of $7.25 per hour.

02. Who is eligible to participate in tip pools in North Carolina?

Only employees who customarily and regularly receive tips (like servers and bartenders) are allowed to participate. Managers, supervisors, and non-tipped staff are excluded.

03. What are the limits on tip pooling contributions?

Employees’ tips cannot be reduced by more than 15% in any tip pooling arrangement to ensure fair retention of gratuities.

04. Can employers deduct credit card processing fees from tips?

Yes, but only if such deductions do not reduce the employee’s total earnings below the federal minimum wage.

05. Are employers required to notify employees about tip credit rules?

Yes. Employers must inform employees about the tip credit allowance, cash wage amount, and their right to retain tips before applying the tip credit.