Important Pay Rate Definitions and Information

Tip Pool

With the exception of your contribution to the tip pool (which is limited to employees who customarily and regularly receive tips), employees retain all of their tip earnings.

Tip Credit

If or when your pay rate is below "minimum wage" a tip credit is used to satisfy the minimum wage requirement. When this occurs:

  • You are paid a base hourly wage plus you earn tips. Your base wage is known as your "cash wage".
  •  If your cash wage is below minimum wage, management will use a "tip credit" as permitted by law in order to satisfy the minimum wage. The difference between your cash wage and minimum wage is the tip credit.
  •  The tip credit will never exceed your actual tip earnings.

Regular Rate

As described above for tipped employees whose cash wage is less than minimum wage, management claims a tip credit equal to the difference between minimum wage and your cash wage. Your cash wage plus tip credit claimed, is defined as the "regular rate".

Overtime Rate

If you work more than 40 hours in one week, you will receive 1.5 times your regular rate for the hours worked over 40. The "regular rate" as defined above will be used to determine the "overtime rate". Your overtime rate is 1.5 X your regular rate.

Blended Rate

Federal wage guidelines per "The Fair Labor Standards Act" requires that when work is performed at two or more different pay rates, and there are overtime hours as well, the hours must be calculated by blending the pay rates into one average regular pay rate, and use that rate for the overtime rate. This results in us paying out all of the hours, regular and overtime hours, at the blended rate. It does not negatively effect your pay in anyway.

Here is an example below:

30 hours at $7.00 per hour = $210.00
20 hours at $8.00 per hour = $160.00
                                  Total = $370.00 divided by 50 total hours = $7.40 average rate per hour.

So in this example $7.40 is the calculated "regular rate" for all hours worked and is used for calculating the "overtime" as well.

This is explained in Department of Labor Fact Sheet #23 below. If you like, you can read the complete fact sheet by clicking here.

Dept of Labor Fact Sheet #23

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