Tipped Wages

Tipped wages refer to the practice where employees in certain industries receive a lower base pay, with the expectation that their tips will make up the difference to reach at least the minimum wage. This is common in jobs like waitstaff in restaurants or bartenders.

Example #1

For example, a server in a restaurant may be paid a base wage below minimum wage, such as $2.13 per hour, with the understanding that their tips will supplement their income. If the tips received do not bring their total earnings up to the minimum wage, the employer is required to make up the difference.

Misuse

Misuse of tipped wages can occur when employers fail to ensure that an employee's tips, when combined with the base wage, reach the minimum wage. Some less scrupulous employers may withhold tips or not compensate employees when their total earnings fall short of the minimum wage. This is a critical issue as it deprives employees of their rightful earnings and violates wage and hour laws meant to protect workers.

Benefits

The benefit of tipped wages is that it allows for certain industries to operate with lower base wages, as long as the employees have the opportunity to earn tips that bring their total compensation up to at least the minimum wage. This system can sometimes result in higher incomes for employees in positions where tipping is common.

Conclusion

It's crucial to ensure that employees receiving tipped wages are fairly compensated and that employers adhere to wage and hour laws. Protecting against misuse of tipped wages safeguards the income and rights of workers in industries reliant on tips for a substantial portion of their earnings.

Related Terms

Minimum WageFair Labor Standards Act (FLSA)Overtime Pay