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How does the tip credit affect your wages?

Many restaurant workers, including wait staff, bartenders, captains, and bussing staff, receive tips as part of their compensation. A tip credit or tip allowance allows employers to pay tipped employees a certain amount less than minimum wage, as long as the employees’ tips plus wages add up to at least minimum wage. 

What is the minimum wage in New York? 

The minimum wage is $15 per hour in New York City, Long Island, and Westchester. Elsewhere in the state, the minimum wage is now $14.20 – up from $13.20 in 2022. 

How much is the tip credit? 

Employers can’t just apply any tip credit they choose. There is a maximum tip credit allowable by law, which varies based on location. In New York City, Long Island, and Westchester, the tip credit for food service workers cannot exceed $5 per hour. That means employers must pay tipped employees a minimum of $10 per hour if the employee earns at least $5 per hour in tips. 

Elsewhere in New York State, the tip credit tops out at $4.75 per hour, up from $4.40 last year. That means tipped restaurant employees who work upstate must earn an hourly wage of at least $9.45, which increased from $8.80 last year.  

(Note: The tip credit does not apply to fast food workers, who must be paid minimum wage by their employers. For tipped service employees other than food service workers, the tip credit is $2.50 downstate and $2.35 upstate.) 

How is the tip credit applied to overtime? 

Most food service employees must be paid overtime for every hour they work over 40 hours per week (a small number of executive, managerial or administrative employees are exempt from overtime.) Overtime pay is equal to 1.5 times regular hourly pay. Therefore, for every hour you work over 40 hours, the restaurant must pay you time and a half, less the tip credit. In downstate New York, that translates to at least $17.50 per hour – or $22.50 (1.5 times $15) minus the $5 tip credit. Upstate restaurant workers are entitled to at least $16.55 for every hour of overtime worked – or $21.30 (1.5 times $14.20) minus the $4.75 tip credit. 

How do you calculate your earnings? 

The chart below shows the minimum amount that tipped food service workers must be paid, based on the number of hours worked in a week. 

Tip Credit
Tip Credit

Have you been paid the correct amount?

If you have not been paid at least the minimum wage for the hours you have worked, contact an employment attorney at Katz Melinger PLLC at 212-460-0047 or online.

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