Organizing payroll can be confusing. But, if you have tipped employees, there’s a whole new layer of complexity added into the process. You want to be compliant and ensure they’re at least earning minimum wage, but you also don’t want their combined earnings to be unfairly higher than your employees who don’t receive any extra cash.
This is where a tip credit comes into play. A tip credit allows you to pay these employees less than minimum wage, as long as the amount they earn from tips makes up the difference. Under the Fair Labor Standards Act (FLSA), tip credit employers can pay these employees as little as $2.13 per hour, as long as their tips make up the $5.12 difference.
Learn more—including what states allow this and how to calculate tip credits—in the infographic below.