Handsome Waiter

Calculating Payroll > Employee Calculations

Handsome Waiter

Handsome Waiter is our other tipped employee. Although good looking, he's relatively new and inexperienced and Ma only pays him the required $2.13 rate per hour when his reported tips equal or exceed the $5.12 an hour tip credit.

Overtime - First, let's see if we owe Handsome Waiter any overtime pay. After checking Handsome's time card Ma determined that Handsome worked 50 hours during the week. Your turn - do we owe him any overtime pay ? Since Handsome worked more than 40 hours during the week we have to pay him for 10 hours of overtime.

In addition Handsome reported $50 of tips received for the week. Not a very good week when compared to Good Waitress's reported tips of $250.00.

Tip Rate Per Hour - First we need to convert his tips reported to an hourly basis or calculate his Tip Rate Per Hour.
Tip Rate Per Hour = Reported Tips / Actual Hours Worked
Tip Rate Per Hour - $50.00 / 50 hours
Tip Rate Per Hour = $1.00

The law states that Ma has to pay at least $7.25 an hour and can use a maximum tip credit of $5.12 per hour if the actual tip rate per hour equals or is greater than $5.12 per hour to offset this rate. If the actual tip rate per hour is less than $5.12 an hour Ma is only allowed to use the actual tip rate per hour to reduce her required "out of pocket" wages paid.

So, for Handsome's straight time hours Ma has to pay him $6.25 an hour "out of pocket".

Out Of Pocket Straight Time Rate =Minimum Wage Rate - Tip Credit

Out Of Pocket Straight Time Rate = $7.25 -1.00

Out Of Pocket Straight Time Rate = $6.25

Overtime Pay Rate - Since we need to pay him overtime, we need to calculate his overtime pay rate. We know that the required overtime rate is determined by multiplying an employee's straight time rate times 1.5. Our question is what is Handsome Waiter's straight time rate. Is it $2.13 an hour ? No, although the tip credit is used to calculate an employer's "out of pocket" payment the employee must by law make at least a $7.25 an hour straight time rate including tips up to $5.12 an hour and be paid at least 1.5 times his straight time rate for any hours worked over 40.

Overtime Rate Per Hour = Straight Time Rate X 1.5

Overtime Rate Per Hour = $7.25 X 1.5

Overtime Rate Per Hour = $10.88

The law also allows an employer to reduce the overtime rate per hour with the tip credit. Our calculated tip credit for the current week was $1.00 an hour.
Overtime Rate Including Tip Credit = Overtime Rate Per Hour - Tip Credit Rate Per Hour
Overtime Rate Including Tip Credit = $10.88 - 1.00
Overtime Rate Per Hour = $9.88

Calculate Earnings - Now that we have our rates calculated, all we need to do is do our math.
Regular Earnings = Out Of Pocket Straight Time Rate X Straight Time Hours
Regular Earnings = $6.25 X 40 hours
Regular Earnings = $250.00

Overtime Earnings = Out Of Pocket Overtime Rate X Overtime Hours

Overtime Earnings = $9.88 X 10 hours

Overtime Earnings = $98.80

Total Earnings Paid By Ma = Regular Earnings + Overtime Earnings

Total Earnings Paid By Ma = $250.00 + 98.80

Total Earnings Paid By Ma = $348.80

Earnings Plus Tips - Our final step is to determine Handsome Waiter's Total Earnings (Gross) including his reported tips.

Total Earnings Including Tips = Total Earnings Paid By Ma + Reported Tips

Total Earnings Including Tips = $348.80 + 50.00

Total Earnings for Week Including Tips = $398.80