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HR Tip of the Month:
Overtime Pay For Tipped Employees
Are you calculating your tipped employees’ overtime wages correctly? Employers of restaurants and other “tipped employees” often assume that paying tipped employees the minimum cash wage multiplied by 1.5 for hours in excess of 40 hours per week satisfy their overtime pay wages requirement. Do not make the mistake of calculating overtime pay incorrectly as it will end up being costly for employers.
Below is an example of a correct calculation of the overtime wage amount for a tipped server in Florida earning $5.23 in cash wages:
- Separate the Florida combined minimum wage $8.25
Cash Wage $5.23 – the minimum cash wage for FL. In this example, it also happens to be the server’s wage.
Tip Credit $3.02 – the maximum credit for FL. This will vary with the cash wage in order to reach combined sum of $8.25.
- Multiply the combined minimum wage $8.25 by 1.5 to get $12.38
- Subtract the Tip Credit $3.02 from the above OT rate calculation $12.38 to get the Tip OT rate $9.36
- Required OT wage for hours over 40 is $9.36 for tipped employee earning $5.23 in cash wages
The Tip Credit would be less than $3.02 if the FL employer pays a tipped employee more than the FL minimum wage for tipped employees of $5.23, affecting the tip OT calculation. Whatever the circumstances, the overtime hourly wage can be calculated by using the above formula.
Please note that the above guide uses the current wage rules of 2018 for employees in the state of Florida. Each state has different regulations and corresponding rates for wage calculations with tipped employees.
Also, please refer to the Wage and Hour Division of the US Department of Labor site at https://www.dol.gov/whd/state/tipped.htm for more information.
Bayview Payroll Services
A Florida Payroll Company
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