U.S. Department of Labor
FLSA Overtime Calculator Advisor
Overtime Calculation Examples for Tipped Employees
The regular rate of pay for a tipped employee is the amount of direct cash wages paid plus the tip credit amount claimed by the employer (plus other additional pay not statutorily excluded). The tip credit is an amount the employer can count from tips actually received by the tipped employee and credit toward the employee’s wages to meet Federal minimum wage and overtime pay requirements. The tip credit cannot exceed $3.02 per hour, even if the employee earns more than $3.02 per hour in tips, and cannot be more than the actual amount of tips received. In addition, the tip credit claimed during overtime hours may not be different from the tip credit claimed for straight-time hours.
The following examples illustrate the regular rate principle as it applies to direct cash wages plus tip credit. In each example, assume that the employee worked 50 hours in a tipped occupation for one workweek and received tips sufficient to equal at least $3.02 per hour and that no additional compensation was paid to the employee.
Example One
The employer pays a direct cash wage of $2.13 per hour and claims a tip credit of $3.02 per hour:
$2.13 per hour Direct cash wage rate
+ $3.02 per hour Tip credit claimed
$5.15 per hour Regular rate of pay
$5.15 x 50 hours = $257.50 total straight-time earnings
$5.15 x 0.5 x 10 overtime hours = $25.75 additional half-time pay
$257.50 total straight-time earnings
+ $ 25.75 additional half-time pay
$283.25 total straight-time earnings and overtime pay
Total non-overtime earnings for the first 40 hours equals direct cash wages ($85.20) at $2.13 per hour plus tip credit earnings ($120.80) at $3.02 per hour from tips received.
- The tip credit taken in overtime hours must be the same as that taken in straight-time hours: $ x 1.5 = $7.73 - $3.02 (tip credit) = $4.71 direct cash wage rate for overtime hours.
Total overtime earnings for the 10 overtime hours equals direct cash wages ($47.10) at $4.71 per hour plus tip credit earnings ($30.20) at $3.02 per hour from tips received.
Example Two
The employer pays a direct cash wage of $3.00 per hour and claims a tip credit of $2.15 per hour (an amount equal to the difference between the Federal minimum wage and the direct cash wage):
$3.00 per hour Direct cash wage rate
+ $2.15 per hour Tip credit claimed
$ per hour Regular rate of pay
$ x 50 hours = $257.50 total straight-time earnings
$ x 0.5 x 10 overtime hours = $25.75 additional half-time pay
$257.50 total straight-time earnings
+ $ 25.75 additional half-time pay
$283.25 total straight-time earnings and overtime pay
Total non-overtime earnings for the first 40 hours equals direct cash wages ($120.00) at $3.00 per hour plus tip credit earnings ($86.00) at $2.15 per hour from tips received.
- The tip credit taken in overtime hours must be the same as that taken in straight-time hours: $ x 1.5 = $7.73 - $2.15 (tip credit) = $5.58 direct cash wage rate for overtime hours.
Total overtime earnings for the 10 overtime hours equals direct cash wages ($55.80) at $5.58 per hour plus tip credit earnings ($21.50) at $2.15 per hour from tips received.
Example Three
The employer pays a direct cash wage of $4.00 per hour and claims a tip credit of $3.02 per:
$4.00 per hour Direct cash wage rate
+ $3.02 per hour Tip credit claimed
$7.02 per hour Regular rate of pay
$7.02 x 50 hours = $351.00 total straight-time earnings
$7.02 x 0.5 x 10 overtime hours = $35.10 additional half-time pay
$351.00 total straight-time earnings
+ $ 35.10 additional half-time pay
$386.10 total straight-time earnings and overtime pay
Total non-overtime earnings for the frirst 40 hours equals direct cash wages ($160.00) at $4.00 per hour plus tip credit earnings ($120.80) at $3.02 per hour from tips received.
- The tip credit taken in overtime hours must be the same as that taken in straight-time hours: $7.02 x 1.5 = $10.53 - $3.02 (tip credit) = $7.51 direct cash wage rate for overtime hours.
Total overtime earnings for the 10 overtime hours equals direct cash wages ($75.10) at $7.51 per hour plus tip credit earnings ($30.20) at $3.02 per hour from tips received.
