Human Resource Blog

4 Responses to “The federal tip credit”

1. George Says:
   November 29th, 2008 at 12:33 pm

   It’s amazing how people can twist a law. The tip credit was frozen at $2.12 an hour. Minimum wage for tipped employees is not $2.12 an hour. Since the tip credit was frozen at $2.12, federal laws actually require employers to pay the tipped employee $4.42 an hour. The tip credit was initially passed with provisions stating that employers could only take a tip credit for half of the $4.25 minimum wage. In 1996 lobbists attempted to get our government to change this law, however, they were unable to do so and instead pursuaded many within our government to make up a lie that employers could now pay tipped employees $2.12 an hour.

   The truth of the matter is, the tip credit is an amount an employer can reduce an employee’s minimum wage by. That amount was locked in not only in 1996 but when the law was first passed into legislation.

2. Caitlin Says:
   November 29th, 2008 at 2:28 pm

   Hi George! We are not completely sure what your point is, from your post, but the federal minimum wage for tipped workers is $2.13 per hour. If the employees tips and direct wages do not equal the federal minimum wage (currently $6.55 per hour) the employer must make up the difference.

   Here is a link to the U.S. Department of Labor Fact Sheet revised in July 2008 that says so: http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf

   Here is a link to the U.S. Department of Labor website clearly stating that the federal minimum wage for tipped employees is $2.13 per hour: http://www.dol.gov/esa/whd/regs/compliance/mwposter.htm

   It is true that a number of states require higher wages for tipped employees. Here is a link to the U.S. Department of Labor state-by-state guide: http://www.dol.gov/esa/whd/state/tipped.htm Please note that a number of these rates will change on January 1, 2009. Thanks for your comments!~ Caitlin

3. George Says:
   December 1st, 2008 at 12:30 pm

   Federal regulations state,

   In determining compliance with the wage payment requirements of the Act, under the provisions of section 3(m) the amount paid to a tipped employee by an employer is deemed to be increased on account of tips by an amount which cannot exceed 50 percent of the minimum wage applicable to such employee in the workweek for which the wage payment is made. This credit is in addition to any credit for board, lodging, or other facilities which may be allowable under section 3(m). The credit allowed on account of tips may be less than 50 percent of the applicable minimum wage; it cannot be more.

   My point is, While the DOL seems to suggest that employers may take a $4.42 per hour tip credit, we have a federal regulation, CFR 531.59 that clearly explains that “The credit allowed on account of tips may be less than 50 percent of the applicable minimum wage; it cannot be more”.

   Now, what should I believe, a fact sheet opinion by the DOL or a federal regulation?

   How can employers be allowed to pay a tipped employee $2.12 when it would mean that the tip credit being taken was $4.42 per hour? Wouldn’t that be more than 50 percent of the applicable minimum wage?

4. Caitlin Says:
   December 1st, 2008 at 3:52 pm

   Hi George! We have never seen anything other than your post that suggests employers can pay tipped employees $2.12 per hour. However, according to the U.S. Department of Labor, Wage and Hour Divison’s website, the FLSA permits employers to pay tipped employees as little as $2.13 per hour. We notice that the regulation you refer to, CFR 531.59 was last revised on 9/28/1967, while the Fact Sheet we cite was revised in July, 2008. Could it be that the regulation you are looking out is outdated??? Sorry that you don’t approve of the U.S. Department of Labor Fact Sheet. Perhaps you should take that up with them??? ~ Caitlin

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