Michigan Employers: Are you calculating tipped employee's minimum wage correctly?
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Chilah Weller: Hey everyone.
Eric Jones: Chilah, what are we going to talk about today?
Chilah Weller: Today we are going to talk about tipped employees and how to handle them from a payroll perspective.
Eric Jones: We have a lot of clients that are restaurant owners, for example, that have tipped employees that get paid a wage less than the Michigan, we're going to talk about Michigan today, Michigan minimum wage of $9.45 (UPDATE: Effective January 1st, 2021, Michigan's minimum wage is $9.65). They could be making anywhere from $3.59, all the way up to $9.44, and be considered a tipped employee. Now I'm going to use an example of an employee that's getting paid $4 an hour. They have to have a tip credit of at least $5.45 in order to meet that minimum wage of $9.45. Now, what happens when that person works over 40 hours in a week? You'll have to pay them overtime. Are you calculating overtime correctly? The normal overtime calculation is 1.5 times their base rate. With a $4 employee, of course, that's $6, right?
Chilah Weller: Wrong.
Eric Jones: That's wrong. What actually you have to do is what's the actual minimum wage overtime rate? That's $9.45 times 1.5. That rate is actually $14.18. Now, you're telling me I have to pay them $14.18? Yes, but no. What you actually do is you take that $14.18, minus that tip credit of $5.45, and you actually come up with a minimum overtime rate of $8.73.
Chilah Weller: Wow, that's a whole lot to remember, Eric.
Eric Jones: I had to look at my screen just to remember some of these numbers.
Chilah Weller: We have a solution for you. When you're utilizing our payroll processing system, we have an automated tipped wage employee calculator that will be able to take care of everything that Eric just so eloquently went through automatically for you.
Eric Jones: On top of that, don't we also do something about minimum wage make up?
Chilah Weller: We do do something about minimum wage make up. If that tipped wage employee combined with their tips and hourly rate did not actually make the 9.45 an hour, we have an automated generator that will make up to that point of minimum wage.
Eric Jones: If this is something that you need help with or you need to go over these numbers again, don't hesitate to give us a call at 517-759-4026. Or contact us online.
Chilah Weller: Thanks for joining.
Eric Jones: Thanks.
Eric Jones: Hey everyone. Welcome to this month's Inside Beyond Payroll. My name's Eric Jones. This is my partner, Chilah Weller.
Chilah Weller: Hey everyone.
Eric Jones: Hey Chilah, what are we going to talk about today?
Chilah Weller: Today we have an awesome presentation about nothing because I ... What am I supposed to say?