What Is a Tip Credit and How Do They Work?

Confusion Around Wage and Hour Law Can Be Costly for The Restaurant Owner.Most restaurant owners know that federal wage law (“FLSA”) permits employers to take a “tip credit” and pay employees who traditionally receive tips—such as servers and bartenders— wages that are less than the federal minimum wage as  long as the tips make up the difference. And it goes without saying, following all other legal requirements is mandatory. The FLSA defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” For many employees, tips make up a significant part of their earnings. The onset, new hires should be informed whether they will be classified as tipped employees and advised of all applicable legal requirements

Truth be told, many restaurant owners fail to correctly uphold this preliminary law “assuming” that they (and their tipped employees) know the requirements, however, their…