minimum wage and tip pay requirements
DESCRIPTION
Tip pay requirements for minimum wage employees can be a challenge for small business owners. Employees who receive tips as part of their regular compensation may be paid $2.13 per hour when they receive at least $30 in tips during a month, according to the Federal Labor Standards Act (FLSA). There are rules to follow though to ensure you're meeting the guidelines. This presentation show you what you need to know.TRANSCRIPT
![Page 1: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/1.jpg)
Tip Pay
Requirements
How Tips Affect Payroll
© SurePayroll, Inc. 2014
![Page 2: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/2.jpg)
What are the tip pay
requirements?
![Page 3: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/3.jpg)
1st
For employees that receive tips, the Federal Labor
Standards Act (FLSA) allows employers to pay $2.13
per hour when tipped employees receive at least $30
in tips during a month.
U.S. Department of Labor
![Page 4: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/4.jpg)
2nd
• The hourly regular rate of pay must add up to be at
least the minimum wage of $7.25 per hour for the
workweek.
• Any shortage is paid by the employer to make up
the difference.
![Page 5: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/5.jpg)
3rd
• There is an allowable “tip credit” that the employer
can take under provisions of the FLSA.
• With a pay rate of $2.13 per hour when the
minimum wage is $7.25, the allowable tip credit is
$5.12 per hour ($7.25 - $2.13).
![Page 6: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/6.jpg)
How does that tip credit work?
Let’s look at an example.
If your state’s minimum wage is $8.15 and it gives a
tip credit of 33%, here is the payroll calculation:
![Page 7: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/7.jpg)
Example
The calculation to determine the net minimum wage to pay:
State allowed tip credit of 33%: $8.15 x 33% = $2.69
Minimum wage (net) for the state: $8.15 - $2.69 = $5.46
In this scenario, you must pay $5.46 per hour to your tipped employee.
This is more than the FLSA required amount of $2.13.
![Page 8: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/8.jpg)
Why does this matter?
It significantly reduces your employment costs if
your employees receive at least $30 in tips during
the month.
In the example, you would pay $5.46 per hour
instead of $8.15.
![Page 9: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/9.jpg)
*NOTE! Some states prohibit the use of tip credits and
others may have higher or lower rates. Employers
must choose the law that compensates employees
the most.
![Page 10: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/10.jpg)
4 Guidelines Employers Must Follow When Using the Tip Credit
![Page 11: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/11.jpg)
1st
The tipped credit amount needs to be equal to or less
than the tipped amount the employee actually
receives.
![Page 12: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/12.jpg)
2nd
Employers must tell the employee about the tipped
credit before taking advantage of it.
![Page 13: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/13.jpg)
3rd
• The tips that an employee receives need to be
kept by the employee.
• Note: There must be “tip pooling” in situations
where it’s common, such as restaurant payroll
between waiters, hostesses, etc.
![Page 14: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/14.jpg)
4th
When tips are given using a credit card, the
compensation must be paid the next payday.
![Page 15: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/15.jpg)
What Employers Need to Know
• Check with your state to ensure you can use a tip credit.
• Your employees must be paid at least the minimum wage for the workweek (defined as 40 hours by the FLSA).
• If an employee’s wages total less than the minimum, you need to compensate the employee for the difference.
![Page 16: Minimum Wage and Tip Pay Requirements](https://reader033.vdocuments.us/reader033/viewer/2022051609/547e3376b37959892b8b54a1/html5/thumbnails/16.jpg)
Paying Tipped Employees
can be Hard.
SurePayroll Makes it Easy.
Easy. Online. SurePayroll.