Ask any tipped employee how they feel about tips, and you'll get the same response: “I depend on tips to live, and if you don't tip you're an ass and you shouldn't use my services.” And that's understandable, given the way they understand how a tipped job works. But it's in the employers' best interest to keep those employees in the dark as to the reality of what a “tipped minimum wage” really means.
This is going to be long, and it's going to sound complicated, but it's not. It won't solve all of the problems of “tipping culture;” only a living wage will do that, but it's never a bad thing for employees to know their rights. Also, all of these numbers are referring to a single 8-hour shift, just to make the numbers easier to work with.
First, we need to talk about “tipped minimum wage.” Most people understand that to mean that an employer only has to pay a fraction of minimum wage, and it's up to the employee to get anything more through tips. That's not, in fact, quite true.
Here is a list of tipped employees minimum wages, both federal and by state. It's got several columns, and it's the titles of those columns that you need to understand.
First is “Basic combined cash & tip minimum wage rate.” That's the least that any tipped employee should take home (before taxes, of course) at the end of any shift. Let's use the Federal rate for an example; many states are higher. The Basic rate is $7.25/hr. That means an employee who works an 8 hour shift should take home AT LEAST $58 in combined “paycheck pay” and tips. BEFORE withholding. I know, it's a crappy amount, but that's not the point of this. Just follow the numbers.
At the end of 8 hours, you should have $58 in pay. And that's where the REST of the columns come in. The next column says “Maximum tip credit against minimum wage” (my emphasis) and the next column says “minimum cash wage.” For the federal rate, that's $5.12 for the tip credit, and $2.13 for “minimum cash wage.” Together, those columns total $7.25.
“Minimum cash wage” is what your boss WANTS you to THINK is all he has to pay you if you get tips. But it's not.
What it really means is that your employer is required to give you $58 at the end of your 8-hour shift, but he can count the first $40.96 (8 hours X 5.12) in tips as if he had paid you that against minimum wage. In other words, your customers pay you, but your boss gets “credit” for it. He absolutely MUST give you $17.04 (8 hours x 2.13), no matter how much you make in tips.
If you make $100 in tips, great, you get $17.04 from him. He marks down the $46.96 as “tip offset,” and then legally claims your rate was $7.25/hour for a total of $58, and you got $53.04 in cash/credit tips.
If you make $30 in tips, then he must give you a paycheck for $28. Because your $30 in tips, which works out to $3.75/hour, doesn't cover the “maximum tip credit against minimum wage.” So he has to make up the difference of 1.37/hour, which, for 8 hours, comes to $10.96. Add that to the $17.04 and that's $28. Add that to the $30 in tips, and now you've hit “the “basic combined cash & tip minimum wage” from column one.
That's the law. That's your money. It's not much: worst case, if you make no tips for a day, you should get your $58 minumum wage, minus withholding. And you're probably not going to get it. Why not? Because either
- Your boss doesn't know the rules (hah!)
- You don't know the rules, and the boss is counting on that
- You do know the rules, but are afraid you'll be fired if you demand your pay
Failure of the boss to pay this, and retaliating against you for demanding it, are as illegal as forbidding you from discussing salary, or retaliating against you for talking about a union.
I know, it's not much in the way of making “more money,” but it should be your BOSS who is responsible for your pay, not your customers.
What about tip pooling?
Well, it shouldn't chage anything. But instead of adding the tips you scoop off the table into your pocket to the “tip offset,” he should add your share of the pool. So if your share of the pool is less than $46.96 for an 8-hour shift, he still has to make up the difference.
So, why did I get a $0-paycheck?
They're a mixed blessing. Your boss is required to withhold certain amounts from your pay for taxes, social security, whatever. If you don't make much, you don't get much withheld. But if you make a lot of tips, to the point that your paycheck will only be for the “tipped minimum wage,” then based on your total take for the day, he'll have to take all or most of your $2.13/hour.
Let's look at the $100 tip day: Your pay (tips and wages) totals $117.04. Withholding is about 1/3 of that, or about $35. But your “paycheck” earnings are just $17.04. So the boss, as is correct by law, withholds all of that, giving you a $0 paycheck (and, coincidentally, meaning you're on the hook for the remaing $18 come tax time).
On the $0 tip day, your pay should be $58. 1/3 of that is about 17.50. So your employer takes the $17.50 from the $58 and you get a net check for $40.50. But, again, if your boss isn't making up the difference as he should, he'll take that 17.50 (because as far as the government is concerned, he's paying you $7.25/hr) out of the $17.04 (8 hours at $2.13) leaving you with another $0 check (and a balance due at tax time of $0.46).