We’ve been discussing the new New York Hospitality Industry Wage Order. One significant difference in the new regulations is how the tip credit has been changed in employees’ favor.
There’s a new minimum wage for tipped employees in the hospitality industry in New York. The tip credit (the amount by which an employer may “under-pay” tipped employees compared to the minimum wage, on the assumption that tips will push the employee back over the minimum) has been decreased and the actual wage that needs to be paid has been increased. In all cases, if employees don’t actually make enough in tips to bring them up to minimum wage, the employer must make up the shortfall.
However, where employees are making sufficient tips, employers used to be able to take a $2.60 tip credit for their food service workers (defined as those employees primarily engaged in serving food or beverages to guests such as wait staff, bartenders, captains, and bussing staff). That meant that the employer only had to pay $4.65 per hour in wages. But with the new wage order effective January 1, 2011, the tip credit for those workers is only $2.25, which means the minimum hourly wage required to be paid by the employer is now $5.00/hour. Either way, tips plus the minimum wage payment must equal at least $7.25/hour, but now the employer foots more of the bill (and any employer not in compliance should calculate and pay any compensation owed retroactive to January 1).
Non-food service employees in other hospitality-related industries have different tip credit amounts which were also modified by the new wage order:
• For service employees in resort hotels (including chambermaids who used to be in their own category), who make at least $4.10/hour in tips, employers may now take a tip credit of only $2.35/hour (compared to $2.90 previously), requiring a wage of $4.90/hour for these employees.
• For service employees in all other hospitality industries, other than food service and resort hotel employees, the tip credit is only a maximum of $1.60/hour making the hourly wage due from the employer $5.65/hour.
In these challenging times, hospitality industry businesses need to now dig a little deeper to ensure that the compensation for their tipped service workers satisfies these new minimum wage requirements.