In addition to the minimum wage increases, the heavily debated tip credit, also increased from 25 cents to 50 cents as well as the trigger to allow the credit. Previously, employers were allowed to take a 25 cent tip credit if the employee made at least an additional 50 cents an hour above the minimum wage (at least 75 cents per hour in tips). As of January 1, 2015, employers may take a 50 cent tip credit as long as the employee earns at least $7 more than the minimum wage, or $14.75 an hour including tips. This means the employee must make at least $7.50 an hour in tips for the employer to take the 50 cent credit and pay a cash wage of $7.25 instead of the statutory $7.75.
(How the $7 figure for tip credit was arrived at is discussed in the April 22, 2014 blog on Minimum Wage Update.)
The Wage Standards Division recognizes that this could be a little confusing and developed a chart to identify the amounts that need to be earned in tips by employees and the amount of cash wages paid by the employer in various situations. The chart can be found by clicking here. Note that Exhibit 1 pertains to last calendar year 2014, Exhibit 2 to calendar year 2015, Exhibit 3 to calendar year 2016, etc.
A reminder that employers are required by law to keep payroll records under section 387-6, Hawaii Revised Statutes, section 388-7, Hawaii Revised Statutes, and Hawaii Administrative Rules 12-20-12. Employers must be able to prove that employees did in fact earn the $7.50 in tips to take the 50 cents tip credit, which makes accurate record keeping a tool that protects the employer.
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