Employee Tip Tracking & FLSA Compliance

Stay On Top of Tip Tracking with Automated Employee Time and Attendance.

Keeping track of tipped employee’s earnings while staying FLSA compliant can be tricky business, but fortunately Journyx is here to help.

In the United States, it is common for workers in some professions, such as waitstaff and valets, to make most of their wages in tips. The laws governing how these payments are tracked and reported vary by state, but regardless of where your employees work, it is vitally important to have accurate accounts of your employees tips and labor.

Laws governing tips are sometimes complicated and highly specific. Many businesses realize only after discussing a pending suit with legal counsel that their tipping or tip pooling policies are illegal. What makes matters more serious is that businesses found to be in violation of the Fair Labor Standards Act regarding tipping policies are often penalized by paying double back wages for a 2-or even sometimes 3-year period.

Having a thorough tip tracking system that is integrated with your automated employee time and attendance solution is a reliable way to reduce the confusion and risk of manual tip tracking.

Tip Tracking Basics

Employees in the U.S. who earn tips as a major component of their income often work for a fixed wage that is less than the federal minimum wage. This is permitted as their employers apply a tip credit when reporting their earnings to raise their reported wage to meet state and federal minimums.

However, to be eligible to apply a tip credit toward and employee’s work, certain conditions must be met. An employee must:

• Work a position where he or she customarily and regularly receives over $30/month in tips
• Be informed that a tip credit will be applied toward wages earned
• Retain all tips received except for tips contributed to other customarily and regularly tipped employees via an appropriate tip-pooling arrangement

Record-Keeping Requirements

In addition to the data required under the normal provisions of the Fair Labor Standards Act, employers must also maintain records regarding the following information for tip-earning employees:

• Tip-earning employees’ records must have a special symbol or letter to designate their status as a tip-earner
• The tips reported to the employer by the employee must be tracked weekly or monthly
• The amount of tip credits attributed to each employee for each pay period
• The number of hours worked each day for tip-earning employees. The total daily or weekly straight-time hours and wages must also be tracked

For employees working in multiple positions, with at least one tip-earning position and one without tips, the amount of non-tip earning time must be tracked. The total daily or weekly straight-time wages for non-tip work must be tracked as well.

Journyx’s time and attendance software helps you ensure each of these requirements is met with nearly automatic ease.

Potential Liability for Tip Pooling

Some establishments pool tips, meaning all tips from all employees are combined and distributed evenly at the end of the day. Employers beware, however, because many FLSA violations are the result of tip pooling.

Before a company mandates participation in a tip pool, state laws, court precedents, and Department of Labor regulations must be considered first. The Department of Labor has defined many occupations that qualify for such programs as the result of exhaustive litigation. For more details about U.S. tip tracking regulations, see the FLSA Tip Regulations page.

Customer interaction is a key element considered by courts when determining whether an employee should receive tips or be required to join a tip pool. Dishwashers, chefs, and bussers, for example, are recognized as being exempt from employer-imposed tip pool mandates.

Remember to Consider State Laws

Sometimes, state laws can contradict the federal law regarding tip reporting. Some states do not use tip credits, prohibiting them outright. Other states require a higher direct wage than federal law requires. Other states still have special provisions governing tip pooling.

Fortunately, Journyx’s time and attendance solutions account for state and federal requirements and can be easily configured to handle your specific business needs.

Contact Journyx today to learn more about our employee time and attendance systems or schedule a demo to see how we can provide the best clarity in workforce tip tracking and timekeeping.