Many employers and employees have questions about how Wage and Hour rules apply to tipped employees. The NJRHA is dedicated to making sure that both employers and employees know their rights and responsibilities. The information below offers some guidelines. The responsible restaurateurs of the NJRHA want to make sure that people understand how the tipped wage and tipped credit work and that every employee must make the state minimum wage of $8.60. No employee can legally be paid less than the state minimum wage. It is a violation of Wage and Hour law. Below is an example of how this works.
We’ve rounded some numbers from fractions of pennies to make the math easier. These numbers are based on current minimum wage as of January 1, 2018.
The actual minimum wage that employers must pay to tipped employees under federal law is $2.125 per hour (rounded to $2.13).
The overtime premium above the minimum wage of $8.60 is $6.43 per hour.
The actual minimum overtime pay rate is $12.90. Tips that are credited against the minimum wage are also credited against the overtime pay rate.
What is the minimum wage for tipped employees?
Tipped employees in the State of New Jersey must make the same minimum wage as everyone else: $8.60 for every hour worked in a work week up to 40 hours. Federal law requires that employers pay no less than $2.13 for all such hours in addition to any tips you receive. If your tips (over the required $2.13) do not amount to at least $8.60 per hour, your employer must make up the difference in your paycheck. This is a requirement and is not optional. Legally no employee can earn below current minimum wage. This request is per shift. Tips cannot be averaged over a pay period.
What if I make more than the minimum wage in tips alone?
Regardless of how much you make in tips, your employer is required to pay $2.13 per hour. Even if you make much more than $8.60 per hour, your employer must pay you an additional $2.13 per hour. For example, if you work a six-hour day and receive $90 in tips (including cash that you take home), that would mean that you actually made $15 per hour in tips. Even so, your employer must pay you an additional $2.13 per hour in a paycheck, bringing your real gross hourly wage up to $17.13 per hour. The government takes seven deductions from every employee in America: state and federal income taxes, as well as deductions for Family Leave, Social Security, Unemployment, Disability, and Medicare. Unlike other workers who receive all their wages by check, tipped employees can take home the majority of their income in cash tips. Sometimes the aforementioned payroll taxes will exceed the $2.13 per hour additional that your employer pays you by check. In such cases, the entire $2.13 per hour would go to the government to satisfy these deductions, therefore the check will be zero because the funds were transferred from your employer to the government. Tipped employees’ income is subject to the same withholding as non-tipped employees. All tips, however they are paid, are considered taxable income.
What if I make less than minimum wage, even after tips?
You’re entitled to the same minimum wage as everyone else. Your employer must make up the difference. For example, if you work a six-hour day and make only $30 in tips (including any cash that you took home from work), your employer must pay you a wage amount that equals the minimum wage. But in this case, since your tips only equaled $5 per hour, your employer must increase its wage contribution from $2.13 to $3.60 per hour to make sure that you make the same $8.60 minimum wage as everyone else.
As a tipped employee, am I entitled to a premium payment for overtime?
Yes. Whenever you work more than 40 hours in an established work week, all hours worked in excess of 40 must be compensated at the overtime pay rate like any other non-tipped employee. For more information on calculating overtime for tipped employees please contact the NJRHA or the New Jersey Department of Labor.
What do I do if my employer is not following these rules and underpaying me?
You’re entitled to the same remedies as everyone else. Of course, in fairness to everybody, it’s always the best policy to talk to your employer first. Perhaps they made a mistake, you read your pay stub wrong, or they misunderstood the law. If they need assistance, they can refer to this website or call the NJRHA for guidelines. But if you’re unable to resolve the problem to your satisfaction, here’s how to report Wage and Hour violations to either the Federal or State Labor Departments (Wage and Hour):
Federal: The U.S. Department of Labor’s Wage and Hour Division (WHD) is responsible for administering and enforcing some of the nation’s most important worker protection laws. If you have questions or concerns, you can contact them at (800) 848-6368 or visit www.wagehour.dol.gov. New Jersey: You can file a complaint with New Jersey’s Department of Labor (NJ DOL) under the Wage Payment Law or the Wage and Hour Law at lwd.dol.state.nj.us/labor/forms_pdfs/lsse/mw-31a.pdf.