• How are tipped employees’ overtime wages calculated?

The calculation can also be different for tipped employees. The employer may be able to claim a maximum “tip credit” of $5.12 per hour allowed under federal law. In calculating the overtime rate for a tipped employee, an employer must multiply the minimum wage ($7.25 per hour), subtract the tip credit ($5.12 per hour), and multiply that figure by the number of overtime hours worked.

  • Example: A tipped employee works 50 hours in a workweek, but receives more than $5.12 per hours in tips. The employee must receive wages equal to 40-hour multiplied by the minimum wage after the tip credit (40 x $2.13 = $85.20), plus 10-hours multiplied by the minimum wage multiplied 1.5 and subtracting the tip credit ($7.25 x 1.5 = $10.88; $10.88 – $5.12 = $5.76; $5.76 x 10 = $57.60) or $142.80 for the workweek ($57.60 + $85.20 = $142.80).

To read more about “Overtime” under the FLSA, please see U.S. Department of Labor Fact Sheet #23.

A Trusted Authority

Our attorneys have been featured on local and national media outlets, including: