The Fair Labor Standards Act helps ensure a minimum level of pay for most employees. It sets the federal minimum wage, but do note you must pay at least your state minimum wage if it is higher.
If your business employs tipped workers, then the FLSA may apply differently.
The minimum wage set under the FLSA for tipped workers is less than that for other employees. But there are still rules to ensure they earn a minimum wage.
Hourly rate and tips
Under the FLSA, the assumption is that a tipped worker will make at least $30 in tips per month. If you cannot prove your employees are earning this much, then you cannot consider them tipped workers. If an employee meets this definition, then you can legally pay less than the minimum wage. For Pennsylvania, the tipped worker wage is $2.83 per hour.
Minimum wage
The minimum wage in Pennsylvania is $7.25 an hour for nontipped workers. However, under the FLSA, you must guarantee your employees are making this much even if they receive tips. You will need to prove that they are receiving at least enough tips to bring their average hourly wage to the minimum wage or you will have to supplement their earnings to bring them up to that amount.
This is a point often misunderstood. It is also why you should track employee tips and ensure they properly report them when filing taxes. You could end up in trouble if they are severely underreporting how much they make.
Handling pay for tipped workers is more complex than it may seem. As the employer, you still must ensure you are meeting the requirements under the FLSA to pay a minimum wage.