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5 Things You Need to Know About Paying Tipped Employees | Unfiltered HR e.015

Restaurant and Bar Owners, this one is for you!

In this episode, Emily (Ally HR Partners) and Jen Strait give you five money-saving, compliance-keeping tips for paying tipped employees. Special guest appearance by Pierogi Pete! 🥟

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🇵🇱 Thank you Ania, Andrew, Peirogi Pete, and the staff at Sto Lat Bar / Chrusciki Bakery, Inc. / Simply Pierogi in Williamsville, NY for hosting us!

Check them out:

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Learn more about Ally HR Partners and schedule a FREE consultation with Emily Martin: allyhrpartners.com

 

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Meet Jen Strait |
completepayroll.com/jen-strait

 

Read the Full Transcript:

NOTE: The following transcript was auto-generated. There may be some minor spelling and grammatical errors. Luckily, it seems we are still safe from the machines. For now.

 
Emily Martin Welcome back, everybody, to another episode of Unfiltered HR. I'm Emily, as usual.
Jen Strait That makes me Jen, as usual.
Emily Martin Jen, where are we today?
Jen Strait We are at Sto Lat / Cruschiki Bakery / Simply Pierogi in Williamsville on Transit Road. So thank you to Ania and Andrew and Cody and a special Pierogi Pete, which I think maybe may be roaming around. I saw him roaming around earlier, so he may make an appearance later. So thank you so much.
Emily Martin We will see you.
Jen Strait The suspense the suspense is killing us.
Emily Martin All right, John. So we are in a fine establishment that serves fine food and drinks today and kind of fittingly cheers to that, to. And actually, we shoot a lot of our videos at great hospitality places and restaurants are near and dear to my heart. I think they are to yours as well. Typically under underserved, underappreciated members of the business community.
Emily Martin So today we're bringing an episode just for you guys, which is all about tips. So we're going to cover we like to break things down as easily as possible. So we're going to cover five things that you really need to know about paying tips to employees and things you probably didn't know.
Jen Strait So other employees areas around here are perking up. All right. Yeah, yeah. We'll talk.
Emily Martin Quietly. But these are things, again, that can result in potential wage and hour violations if employees make claims later, if a deal comes knocking. So certainly things you need to know, but also things actually there are some cool things in this episode that can really save you some money to save your money.
Jen Strait Now, they're trying to scan through don't scan through this one. Okay. Password. All right.
Emily Martin So let's get started. Right. All right. So the first thing is just to point out that tips, minimum wage is still a thing. So I think, you know, with a minimum wage rising around New York City and whispers that, you know, federally it potentially could go to $15 per hour at some point. I just want to point out that if you're in the hospitality industry and now it's exclusive to the hospitality industry in New York State, you still can pay a lower minimum wage and take a tip credit for that employee wage.
Emily Martin So right now, the minimum wage in New York State for our region in Buffalo is 13, 20 per hour. The tipped minimum wage rate is only 880, which means you can take up to a $4 and 40 cent per hour tip credit for employees wages that are tipped employees who do tip to work. So what that means, John, is you can save some money if you're an employer and paying those wages if it's a tip, heavy job where people can make up a lot of that money.
Emily Martin Back in tips. You can take up to 440 an hour as a credit with those tips.
Jen Strait Yeah. And I think the the term tip credit may confuse some people, but it's really just as if it's a server. They're getting paid eight.
Emily Martin 80 potentially as little as you can go higher, you can choose to take less of a credit.
Jen Strait Yes. So the credit would be that they're making that other $4 or whatever. That adds up to the minimum wage within their.
Emily Martin The tips layer.
Jen Strait Within their tips or so. And there's ways to track that. So we'll talk about that, too.
Emily Martin But I don't know about you, Jen, but I'm tipping more than ever. I mean, I get that virtual prompt every time I buy a coffee or whatever.
Jen Strait And, you know, it's funny when they issued a tip before, but while you're ordering. Yeah, right. Well, I don't know yet, but yeah, I grew up working in a restaurant and everything, so I have I, I'm an over tipper, so. Which is good? Which I.
Emily Martin Appreciate it. But it's really kind of the point I want to make here is minimum wage for our region is still technically supposed to be heading towards $15 an hour. So if you're a a business in hospitality right now, that's kind of finding it hard to survive paying 13, 20 an hour. Maybe when things go up again next year, you decide not to increase your base rate and instead start taking a partial tip credit.
Emily Martin Right. That is an option that you have. So just be aware that you still have that option and especially with, you know, things and inflation and things being a little bit unstable economically, these are all options we want to make sure that.
Jen Strait You know about. And this is something, again, we keep talking about math and all of these numbers. This is something you can talk to your payroll company about. Hopefully it's company payroll at some point, but any payroll company about to make sure that you talk about your options and having the formulas set correctly. So you're not always figuring out the math every night or every week of payroll when you're doing the tips, because that can become very cumbersome.
Jen Strait Where we as a payroll company are having those formulas set up properly. So that is being tracked and added for you of whether you need the tip credit and whether they need a minimum wage and things like that.
Emily Martin Yeah, yeah. Your payroll system should certainly be able to calculate each pay period whether or not your someone is making enough tips to get up to that minimum wage and doing all that for you. So. All right. So number one, number two, this is a fun one that maybe you don't know about. Could save you some money.
Jen Strait Listen up, ears up.
Emily Martin So when your employees are getting tips paid out through credit card charges, which again more than ever people do not carry cash, they're paying through things electronically and tablets or whatever it might be through credit cards use an employer are paying a fee to process those tips are on those tips that then go to your employee right so they don't go to you at all going straight to your employees and but you're paying a 3% fee on that.
Emily Martin So actually, New York state law says that you are allowed to take that 3% off the top before you distribute those credit card tips to your employees in order to reimburse yourself for those fees. And again, at a time where more tips are being paid than ever and certainly more are being processed through credit cards than ever. If you took a look and probably looked in the last year so far how much you've paid out in credit card tips and multiply that by, you know, to calculate what 3% would be.
Emily Martin It might be a big number, and you might be surprised by how much processing these tips is costing you. So, I.
Jen Strait Mean, that could be hundreds of thousands of dollars difference.
Emily Martin In terms of the number of credit card tips a year. Right. Which 3% could easily be, you know, a 10 to $20000 in savings business a year depending on your volume. So definitely something you want to think about and consider. And it's a very little, you know, increment off the top that you pay back to your employees. And it is just a cost of your business at a time where we know food costs and labor costs and things are all really eating into the very razor thin margins of restaurants and things as it is.
Emily Martin So definitely take a look at that opportunity if you can do it now already. Yeah, absolutely. Some good news.
Jen Strait Some good news.
Emily Martin I want to get to deliver good news for dad. Okay. So another thing you need to know about tips. Number three of number five is that none of your managers or supervisors should be sharing in a tip pool. So, John, do you know the difference between a tip pool and tip sharing?
Jen Strait I don't think secret information. I just hear a pool and it's warm and I just think it's summertime. Yeah. What is that right now? Tip sharing. So tip shows. It seems so tip sharing.
Emily Martin Is kind of when employees are agreeing on a voluntary basis to share their tips among one another. Maybe they decide together they're going to pool them and then, you know, distribute them or a server shares or tips with a boss person or something like that. Tip pooling is more of an employer mandate and unregulated system where a lot of like fast casual places will do this.
Emily Martin For example, where all the the tips for a shift kind of get pooled into the system and then depending on the number of hours someone worked, you know, during that week or that shift, they the employer then distributes the tips on a percentage basis to the employees. So the main takeaway here is that managers or supervisors or people that lead employees or have any hiring and firing decisions when it comes to employees should not ever be allowed to share in that tip rule that's just plainly not allowed in illegal, especially through New York State.
Emily Martin So make sure that that's not happening where there are some exceptions done is if it's like a working supervisor or a key holder, someone that's just responsible for closing or opening at the end of shifts, if they're really primarily helping serve customers and doing some of those duties, they can be included in that. But anyone with really pretty strict manager duties should not be including in that.
Jen Strait Right? That makes sense.
Emily Martin So commonly misunderstood, but something you want to make sure it does not happen. Sure. So number four, on the topic of pools and tip pool pools, only the employees who if you if you are taking a tip credit. So if you're not paying everybody at least regular minimum wage currently 1320 per hour, if you're not doing that and you are taking a tip credit, only those employees who are taking a tip credit may be included in the tip pool.
Emily Martin So, Jan, where this comes into play is if you want to share some of the tips with your backend employees like dishwashers or food prep people who cannot be paid the tipped minimum wage and they're probably being paid minimum wage, that's great that you want to share those tips with them, but you can't do that if your front of house people are getting paid tips.
Jen Strait Minimum wage or taking that tip credit cards split evenly, correct? Yeah. Now you see that a law in any measure like.
Emily Martin It is great, yet they can't be taking any portion of that pool at all. Got it. So if a lot of restaurants have moved just towards paying all servers and all people, at least the minimum wage, and in that case, anyone can be in a tip for as long as it's not managers, but back end can be in there.
Emily Martin But make sure that you're not sharing it with people that.
Jen Strait Are in the back end of their credit. That makes sense, but also can be very confusing for business owners.
Emily Martin Absolutely. And there will be a written piece to follow up with this on my website as well and our partner Starcom. So there'll be more details there to explain this. We're on our last one. We are this one is a bit confusing and I'm just going to touch on it and then you guys can read about it later.
Emily Martin But there has been a new rule instituted by the federal government this year that basically sets new guidelines for when tipped employees may be doing non tipped work. So things like prepping fruit for the bar for cocktails or rolling silverware and, you know, folding napkins, all this type of prep work. So if you have employees who do some of that as part of their serving job, whether it's bartending or, you know, waiting tables, if they are doing that kind of work for more than 20% of the time in the work week, you cannot.
Pierogi Pete Pay them a tipped wage at all and you have to pay them at least the minimum wage. Okay. So that's number one.
Emily Martin And then number two and even newer rule as part of that is if an employee at any point is working and doing that prep work for more than 30 minutes at a time, you need to pay them regular minimum wage for that 30 minute or whatever increments.
Jen Strait At that specific time.
Emily Martin Yes. So again, tipped wages kind of like our last episode of overtime not is totally simple and black and white is it seems like most things the landscape is getting even more nuanced and complicated at both the federal and state level. So make sure you check out the written piece where you watch this video a couple times and know what the rules are.
Emily Martin So you got to say.
Jen Strait Yeah, that's good to know because again, working in a restaurant that was all included in prep work and closing and doing the tables and doing the kitchen bottles and salt shakers and all of that. But you have to be conscious of are they still serving at that time? Right off.
Emily Martin Keep it to a minimum, try to make it during their actual service work as well. So that's mixed. And I think that's Jen, you know, that's.
  Other tips is how do we we have a lot of tips. So. Well.
Jen Strait If you have any questions, this is a lot. Again, this is a lot. So we have all the information tagged on our site here. And hello, heroes. Oh.
Pierogi Pete Oh, talk about an extra tip. How about some wannabe? Oh, where are you?
Jen Strait So these these look like they smell like chicken wings.
Pierogi Pete Yeah.
Jen Strait I'll give heat. Everyone, I got you in.
Pierogi Pete So I'm sure you've seen all my favorites.
Jen Strait Yeah.
Pierogi Pete I'm going to give these to you guys.
Jen Strait Thank you so much, Joy. Thank you.
Pierogi Pete You're very welcome. I can't wait to see you guys again. Barbecue tips.
Jen Strait Thank you so much for watching. That was easy for me to say. Thank you so much for watching. If you would like us to host at your venue, we would love it. We'd absolutely love it. So please send us a email at unfiltered h.r. And complete payroll dot com or contact emily or myself directly and we'll see you there.
Emily Martin Yeah. Let's dig in.
Jen Strait Cheers. Thank.

 

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