FLSA Tip Credit Increases

Under the Fair Labor Standards Act (FLSA), employers must pay tipped employees at least $2.13 per hour and they can count tips toward the remainder of the statutory minimum wage. With the federal minimum wage increasing to $6.55 on July 24, 2008, employers may take up to $4.42 as a tip credit.

Tips received may be used as a "tip credit" that may be counted toward the remainder ($4.42) of the statutory minimum wage ($6.55, effective July 24, 2008). A tip credit may be taken only for hours an employee works in an occupation in which he/she qualifies as a "tipped employee." A tipped employee is one who regularly receives more than $30 a month in tips. Any tips received by an employee in excess of the permissible tip credit are not considered remuneration for employment and need not be included in computing the employee's regular rate for overtime pay purposes.

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With the federal minimum wage increasing to $6.55 on July 24, 2008, employers may take up to $4.42 as a tip credit.