Are there tipped employees on your staff? The Trump Administration’s regulatory agenda (published just last month) included an update you’ll want to be aware of.

One of the items mentioned in the agenda affects tip regulations under the Fair Labor Standards Act (FLSA). The rule under consideration would reverse the current regulations from during the Obama Administration.

Here’s a quick refresher.

According to the Wage and Hour Division of the DOL, a tipped employee is someone who customarily and regularly receives more than $30 a month in tips.


The tip-credit provision of the FLSA gives employers who have tipped employees the option of paying a reduced hourly wage of $2.13 as long as the employees receive enough in tips to bring their hourly rate to the federal minimum ($7.25/hour). Employers have to pay the difference if the tips come up short. If there’s more than enough, the employee gets the excess tips.

Current tip-pooling regulations

In 2011, the Obama Administration established that tips belong to employees and cannot be distributed to other workers or kept by the employer. This, even if the employer doesn’t take a tip credit and pays tipped employees full minimum wage.

The update.

According to the agenda, the DOL “will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.”

While this announcement does not immediately change the existing law, it’s a good idea to keep your eyes peeled over the coming months. PrimePay will stay on top of the changes as well.

You can view the entire announcement here.


DYK? PrimePay has a host of calculators for you to use at your disposal. You might be interested in our FICA Tip Credit calculator. The Federal Insurance Contributions Act (FICA) says that the tips your employees receive from customers count as taxable income for which you can earn credit. 

Click here to access the calculator. 

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.