Good Waitress is one of Ma's tipped employees and Ma requires her to report the tips received from her customers each week. She had an excellent week and reported tips received amounting to $250.00 for the week.
Although by law, Ma could legally only pay her "out of pocket wages" of $2.13 ($7.25 -5.12) per hour as long as her reported tips equal or exceed the maximum tip credit of $5.12 per hour, she's such a great waitress that Ma, although not required to, pays her $8.00 an hour.
- Overtime Hours - Our first step is determine if Good Waitress worked any overtime hours during the week. Her time card shows that she worked a total of 45 hours during the week and is entitled to 5 (45-40) hours of overtime pay.
- Overtime Rate - Next we need to calculate her overtime rate of pay.
Overtime Rate Per Hour = Straight Time Rate X 1.5
Overtime Rate Per Hour = $8.00 X 1.5
Overtime Rate Per Hour = $12.00
- Calculate Earnings - Now that we have her rates, let's do our math and calculate her regular and overtime earnings.
Regular Earnings = Straight Time Rate X Straight Time Hours
Regular Earnings = $8.00 X 40 hours
Regular Earnings = $320.00
Overtime Earnings = Overtime Rate X Overtime Hours
Overtime Earnings = $12.00 X 5 hours
Overtime Earnings = $60.00
Total Earnings Paid By Ma = Regular Earnings + Overtime Earnings
Total Earnings Paid By Ma = $320.00 + 60.00
Total Earnings Paid By Ma = $380.00
Are we done yet ? You know better, Ma must now account for Good Waitress's Reported Tips. Although Ma did not actually pay Good Waitress's Tips amounting to $250, her customers did, Ma is required by law to include Good Waitress's Tips in her Gross Wages in order to calculate Good Waitress's social security, medicare, and income tax withholdings. Note: Ma also has to match and pay her employer's share of social security and medicare based on Good Waitress's total gross pay including her reported tips.
- Include Reported Tips - Our final step is to determine Good Waitress's Total Earnings (Gross) including her reported tips.
Total Earnings Including Tips = Total Earnings Paid By Ma + Reported Tips
Total Earnings Including Tips = $380.00 + 250.00
Total Weekly Earnings Including Tips = $630.00