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Paying Your Employees

Your staff isn’t going to clock in and out on a time clock just because you’re nice to work with. They expect to be paid. The state you live in will determine how you handle their hourly wage and their tips.

Under the Fair Labor Standard Act (FSLA), the following applies to tipped employees:

  • As long as an employee routinely earns at least $30 per month in tips, you can pay the employee as little as $2.13 an hour. However, that amount plus the tips actually earned by the employee must bring the employee’s earnings up to minimum wage. If it doesn’t, then you must make up the difference. Some states, including California, don’t allow employers to pay tipped employees less than the minimum wage. So contact your state labor board to confirm what the law is in your state or municipality.
  • No arrangement may exist whereby any part of an employee’s tip becomes the property of the restaurant owner. A tip is the sole property of the tipped employee. Where an employer does not strictly observe the tip credit provisions of the FLSA, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage, in addition to retaining tips they receive.
  • The only time that an employee doesn’t retain all his or her tips is when tip splitting or pooling arrangements among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders are made. “Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.”Read more on Restaurant Expert Witness, Howard Cannon’s BIO at


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