In some countries, tipping is frowned upon or even illegal. In the U.S. and some other countries, tipping is common, and the nature of your business may mean that you only pay part of what your employees earn; the balance comes to them in the form of tips from customers. This is so in restaurants and bars, beauty and nail salons, taxis, hotel cleaning staff and porters, and casinos. What does this arrangement mean for your business?
An employee who is engaged in an occupation in which the employee customarily and regularly receives at least $30 per month in tips is treated as a “tipped employee” for federal purposes. As an employer of a tipped employee, you are only required under federal law to pay $2.13 per hour in direct wages if that amount combined with the tips received at least equals the federal minimum wage. Today, most tipped employees receive a higher hourly rate. Nonetheless, if the employee’s tips combined with your payment of direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, you must make up the difference.
Most states may have their own rules for tips, which are more employee-friendly than federal rules. In fact, some states such as California, Minnesota, and Oregon, require full minimum wage payments to tipped employees; employers cannot get any credit for the fact their workers are tipped.
Tips are treated just like regular wages when it comes...
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