The pay for the work done by tipped workers is counted both in flat wages and in tips. The money customers spend at business places they count on a service provided by workers can fall short of enough to make sure these workers have a living wage in their hands.

Work done by these workers earns no less than the minimum wage written in the Fair Labor Standards Act.

Tipped Workers

The tipped worker minimum wage in the Fair Labor Standards Act covers workers who customarily and regularly earn $30 a month in tips. Waiters and waitresses, and bartenders, that wait on restaurant customers are the typical workers that collect both flat wages and tips. The food and beverages they serve earn them the due pay called tips.

Workers that support the tip earners, such as busboys and busgirls and hostesses and hosts that do not get tips from customers, count as tipped workers when the tip earner pays out a part of their tips to the support worker. A bar worker that supports a bartender and customarily and regularly gets $30 or more in tips in a month is a tipped worker covered by FLSA.

The other typical workers serve customers at hotels, casinos, service desks, hair salons and barber shops, automobile parking places, and taxi and limousine service companies.

Tips

A tip is a gratuity customers pay directly to a worker that provides a service to the customer. Service charges that customers have to pay are not tips. For example, a 15 percent restaurant charge on the dinner bill is part of the employer's gross receipt. They can use the money to pay the worker, but the money is not a tip.

Tips are the property of the worker. The employer and the worker are not allowed to agree to pay the worker less than the amount of tips paid to them so the employer can keep the money. Workers can pay out tips to other workers, but not the employer.

The Tipped Worker Minimum Wage

The living wage for tipped workers is the same as the minimum wage given to regular workers. The federal minimum was set at $7.25 an hour on July 24, 2009.

The difference is the employer can use both a flat wage and the tips paid to a worker to pay out a full living wage. The flat wage can not be less than $2.13 an hour. Any difference between the full minimum wage and the flat cash wage minimum paid to tipped workers must be paid by the employer to make the wage full.

Tip Credit

The employer can count up to $5.12 an hour in tips to pay the full minimum wage. The amount they count is called their tip credit. Only the tips actually paid to a worker can count towards the tip credit.

When an employer does not claim the tip credit, they must pay a flat cash wage at the full minimum wage or more and let the worker keep all their tips.

Bill charges paid out to workers are not counted in the tip credit.

The tips an employer claims as a tip credit are still the property of the worker.

Tip Pool

Tipped workers and their support staff can agree to share tips. The arrangement is called a tip pool or tip sharing. Higher earning tip earners typically pay out tips to the lower tipped workers and the support staff. Amounts they pay out do not count in the tip credit and can not make up any of the difference between a flat wage and the full minimum wage.

Overtime Pay

Overtime pay paid to tipped workers that work more than 40 hours in a week is calculated using the full minimum wage, not the $2.13 minimum flat wage for tipped workers. One and one half times the full minimum wage.

The tip credit an employer claims for an overtime hour can not be more than for a credit claimed for a regular hour the worker works.

Informed Workers

Employers must keep their workers informed on the tipped worker wages they pay. They must tell them the amounts of the flat cash wage paid to the worker and the tip credit the employer claims, and the minimum flat cash wage and maximum tip credit amounts allowed by FLSA. Three other things must be told to the worker:

• the tip credit can not be more than the tips the worker actually gets paid
• the worker keeps all tips unless they want to tip out to other workers
• unless the employer tells the worker the tip credit rules, the employer is not allowed to claim the tip credit for that worker

Credit Cards

When a customer charges the tip on a credit card, employers can take the receipt percentage they pay for a credit card service out of the worker's tip. For example, if Master Card charges a restaurant manager 3 percent to use a customer's card to pay the bill and tip, the employer can pay the worker 97 percent of their tip. But, the worker still must be paid the full minimum wage. The credit card company percentage does not lower the minimum pay.

The Highest Minimum Wage

The federal tipped worker minimum wage is the lowest wage a law can guarantee a tipped worker. State laws guarantee higher minimums in most states. The state minimum is higher in almost every state that has a law for tipped workers. Some states do not allow a tip credit and guarantee a tipped worker a full minimum cash wage.

Some states simply allow a state tip credit. Most states that do have tipped worker minimum wages allow an employer to claim a tip credit if the paid flat cash wage and tips together are 50 cents more than the full minimum wage.

A lower state minimum for tipped workers than for regular workers is extraordinary.

Hard Work and Serving To Please

The law protects workers that set customers at ease as they put their hard work into a business enterprise. Customers pay for earnings that are secure.

Sources:

The Fair Labor Standards Act (1938).

Wage and Hour Division, U. S. Department of Labor, Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (March 2011).

Wage and Hour Diviosb, U. S. Department of Labor, Minimum Wages for Tipped Employees--Table of Minimum Hourly Wages for Tipped Employees, by State online (January 1, 2011).