Should staff who earn tips be paid less?
Still, it’s demoralizing and can be a financial blow for employees, so, if a company needs to lower pay for financial reasons, it’s critical that the boss gets the same percentage pay cut. A pay cut that is universally applied to all employees, after all, is not about you, it’s about everyone.
For instance, some jobs have minimum wage or other legal restrictions, such as waitstaff positions that are paid a low minimum wage but are assumed by the IRS to be generating income through tips.
The Fair Labor Standards Act (FLSA) allows employers to pay workers who customarily receive tips less than the standard minimum wage as long as certain conditions are met-but the rule’s.
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Employees who receive tips of less than $20 in a calendar month aren’t required to report their tips to you but must report these amounts as income on their tax returns and pay taxes, if any. Cash tips include tips received directly from customers, tips from other employees under any tip-sharing arrangement, and charged tips (for example, credit and debit card charges) that you distribute to the employee.
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Subtopics. An employer of a tipped employee is only required to pay $2.13 per hour in direct wages if that amount combined with the tips received at least equals the federal minimum wage. If the employees tips combined with the employers direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage,
· Subscribe to our free newsletters. Her restaurant in Washington, DC, paid her the local minimum wage for tipped workers, $2.77 an hour, which meant that after taxes, her paycheck was usually zero. Her tips, never dependable, ranged from $20.