How Do I Calculate My Overtime Pay as a Tipped Worker?

Ask Paywizard.org - How do I calculate my overtime pay as tipped worker? Paywizard.org anwers.
Question - Date: 2009

 

If a tipped employee works overtime, what is the Maximum Tip Credit  against Minimum Wage, and the Minimum Cash Wage per hour, for the overtime hours? 

IE: Do I multiple each of these by 1.5, or must I still use the original tip credit per hour and, therefore, pay a larger sum for the cash wage?

 

Answer Paywizard.org:

The federal Fair Labor Standards Act (FLSA) requires employers to pay workers one-and-a-half times the employee's regular rate of pay for all hours worked over a 40 hours per week. 

For tipped workers employers should keep in mind that the law requires that a worker's regular pay rate can never be less than the applicable minimum wage-rate. 

For example: an employer pays tipped workers the current federal minimum wage of $7.25, which is broken in $2.13 cash wage and a tip credit of $5.12 per hour.
The employer should calculate the overtime rate for the tipped worker notby multiplying the cash wage of $2.13 by 1.5 but by multiplying the minimum wage of $7.25 by 1.5 and then subtracting the hourly tip credit of $5.12. 

Incorrect Calculation: minimum cash wage $2.13 x 1.5 = $3.20 per hour
Correct Calculation: federal minimum wage $7.25 x 1.5 = $10.88 - federal tip credit $5.12 = $5.76 per hour

Please keep in mind that many states have tip credit laws that are stricter than the federal FLSA. 

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