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 requirements. The tip credit claimed cannot be more than the actual amount of tips received, and cannot exceed the difference between the applicable Federal minimum wage rate and the minimum direct cash wage of $2.13 per hour, even if the employee earns more than that amount in tips. 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 paid plus tip credit claimed. In each example, assume that the employee worked 50 hours in a tipped occupation for one workweek, received tips sufficient to equal at least the minimum required by the FLSA and that no additional compensation was paid to the employee.
Example One
The applicable Federal minimum wage is $7.25 per hour. The employer pays a direct cash wage of $2.13 per hour and claims a tip credit of $5.12 per hour:
$2.13 per hour Direct cash wage rate
+ $5.12 per hour Tip credit claimed
$7.25 per hour Regular rate of pay
$7.25 x 50 hours = $362.50 total straight-time earnings
$7.25 x 0.5 x 10 overtime hours = $36.25 additional half-time pay
$362.50 total straight-time earnings
+ $ 36.25 additional half-time pay
$398.75 total straight-time earnings and overtime pay
Total non-overtime earnings equals direct cash wages ($85.20) at $2.13 per hour plus tip credit earnings ($204.80) at $5.12 per hour from tips received.
The same tip credit is taken in overtime hours: $7.25 x 1.5 = $10.87 - $5.12 (tip credit) = $5.75 direct cash wage rate for overtime hours.
Total overtime earnings equals direct cash wages ($57.50) at $5.75 per hour plus tip credit earnings ($51.20) at $5.12 per hour from tips received.
Example Two
The applicable Federal minimum wage is $7.25 per hour. The employer pays a direct cash wage of $3.00 per hour and claims a tip credit of $4.25 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
+ $4.25 per hour Tip credit claimed
$7.25 per hour Regular rate of pay
$7.25 x 50 hours = $362.50 total straight-time earnings
$7.25 x 0.5 x 10 overtime hours = $36.25 additional half-time pay
$362.50 total straight-time earnings
+ $ 36.25 additional half-time pay
$398.75 total straight-time earnings and overtime pay
Total non-overtime earnings equals direct cash wages ($120.00) at $3.00 per hour plus tip credit earnings ($170.00) at $4.25 per hour from tips received.
The same tip credit is taken in overtime hours: $7.25 x 1.5 = $10.87 - $4.25 (tip credit) = $6.62 direct cash wage rate for overtime hours.
Total overtime earnings equals direct cash wages ($66.20) at $6.62 per hour plus tip credit earnings ($42.50) at $4.25 per hour from tips received.
Example Three
The applicable Federal minimum wage is $7.25 per hour. The employer pays a direct cash wage of $4.00 per hour and claims the maximum tip credit of $5.12 per:
$4.00 per hour Direct cash wage rate
+ $5.12 per hour Tip credit claimed
$9.12 per hour Regular rate of pay
$9.12 x 50 hours = $456.00 total straight-time earnings
$9.12 x 0.5 x 10 overtime hours = $45.60 additional half-time pay
$456.00 total straight-time earnings
+ $ 45.60 additional half-time pay
$501.60 total straight-time earnings and overtime pay
Total non-overtime earnings equals direct cash wages ($160.00) at $4.00 per hour plus tip credit earnings ($204.80) at $5.12 per hour from tips received.
The same tip credit is taken in overtime hours: $9.12 x 1.5 = $13.68 - $5.12 (tip credit) = $8.56 direct cash wage rate for overtime hours.
Total overtime earnings equals direct cash wages ($85.60) at $8.56 per hour plus tip credit earnings ($51.20) at $5.12 per hour from tips received.
