What is the full tip credit on wages?

Answer 1

There is no full tip credit on wages. The tip credit is a scam that lobbyists for the restaurant industry pushed through Congress. Congress didn't even understand what they were passing when they passed the bill. Let me explain. The tip credit explains that in order for an employer to take a tip credit, the employer must allow the tipped employee to retain all tips. The truth of the matter is, an employee cannot retain all his tips when his employer is taking part of them to pay part of what the employer owes the employee in minimum wage. Lets take for instance, an employee who receives $4.00 an hour in tips. According to the federal tip credit, this employee's employer can not take the maximum tip credit of $5.12 an hour because that would leave the employee earning only $6.13 an hour while Federal Laws mandate that every employee covered under the FLSA must earn at least $7.25 per hour. The way the FLSA explains such a situation is, If an employee's tips do not combine with his hourly wages to equal or exceed minimum wage, currently $7.25 an hour, the employer must make up the difference. In this case, the employee is not receiving enough tips for his employer to take to reach the maximum allowable tip credit. You see, the truth of the matter is, the tip credit actually allows employers to steal up to $5.12 an hour in tips from an employee who receives tips. If an employee only receives $2.00 an hour in tips, then his employer can only steal $2.00 an hour in tips so that they may be used to reduce the employer's burden of paying the employee $7.25 an hour to an amount of $5.25 an hour. If employee receives $4.00 an hour in tips, then his employer can only steal $4.00 an hour in tips so that they may be used to reduce the employer's burden of paying the employee $7.25 an hour to an amount of $3.25 an hour. If an employee earns $5.13 or more in tips, his employer can steal up to $5.12 in tip so that they may be used to reduce the employer's burden of paying the employee $7.25 an hour to an amount of $2.13 an hour. Now let me prove how such tip credits are actually prohibited by the very law that seems to allow them. The provisions of the tip credit clearly state that in order to take a tip credit the employer must allow the tipped employee to retain all tips. In the previous scenario the employee was receiving $4.00 an hour in tips. Let us now analyze what would happen if customers suddenly stopped tipping this employee. If' customers suddenly stopped tipping this particular employee $4.00 an hour, his employer would not be able to use the customer's tip to pay $4.00 an hour towards the employer's minimum wage obligation for this employee. The employer would have to come out of his own pocket with $4.00 an hour to insure that his employee was receiving $7.25 an hour. Before customers suddenly stopped tipping, the employer was able to pay the employee $3.25 an hour because the tips he was receiving were paying the $4.00 an hour the employer would normally have to pay. After customers suddenly stop tipping this particular employee, the employer has to pay the employee the full minimum wage of $7.25 an hour. What we have proven so far is that if customer's stop tipping this particular employee the employer would have to take money out of his own pocket to pay this employee's minimum wage. If customers stopped tipping this particular employee $4.00 an hour, the employee would not lose anything. His employer would have to increase his hourly wages to $7.25 an hour, due to the fact that there are no tips for his employer to credit towards the employer's minimum wage obligations. What we have now proven is that if customers stop tipping this particular employee the employee will not lose anything. The point of this analysis is to prove that when an employer takes a tip credit he is undoubtably taking the customer's tip. While the employee who was receiving $4.00 an hour in tips before customer's stopped tipping was earning $7.25 an hour in wages and tips, this employee will earn $7.25 an hour if customers stop tipping him. While his empoyer was paying the employee $3.25 before customers stopped tipping his employee, the employer will have to take $4.00 an hour our of his own pocket to pay the employee if customers stop tipping. The question that remains is, what was actually happening to the tips customers gave the employee? The answer is realized when one simply looks at what would happen if customers stopped tipping. The employee will lose nothing if customers stop tipping. The employer will have to take $4.00 an hour out of his own pocket if customer's stop tipping. The answer to what was actually happening to the tips customer's gave the employee is, The employer was putting them in his own pocket. Only the employer will lose any money if customers stop tipping this particular employee. Now that we understand that the tip credit simply allows an employer to put part, or all of the employee's tip in the employer's pocket, we will now go back and analyze the provsions of the tip credit. The tip credit explain that in order for an employer to take a tip credit, the employer must both inform the emplyee of the tip credit and allow the employee to retain all tips. How can the employee retain all tips when his employer is putting them in his own pocket? What the law is stating is, an employer can take a tip credit as long as the employer doesn't take a tip credit. Now tell me that Congress understood what they were passing when they passed the tip credit bill. They will never admit that they passed a bill allowing emloyers to steal the customer's tip in such a manner. That's probably why they added provisions stating that in order for an employer to take a tip credit the employer must allow the employee to retain all tips. You see, by adding language that suggests that the tip credit is not simply allowing employers to steal the customer's tip, those who passed the law are exhonerated from claims that they deliberately passed such criminal legislation.