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How Do Tip Credits Affect Minimum Wages in Michigan?

Employees all over Michigan earn tips in addition to their wages: waiters, hotel cleaning staff, bartenders, doorpeople, deliverypeople, movers, and many more. Employees who earn tips do, however, face a more complicated process regarding their pay. There is state and federal legislation on what a tip is, how much your employer must pay as minimum wage, and whether you need to contribute to a tip pool. Typically, when state and federal laws diverge, your boss is required to follow whichever law is most generous to you and your fellow employees. You may naturally be wondering what Michigan and federal laws apply to you, such as tip credits, and what protections you have for your pay. This article will explain that and more, so please read carefully. Don’t forget that for any employment concern, your first step should be to reach out to an experienced Marquette wage and hour lawyer.

Fundamentals of Tip Credits

You have minimum wage protections now as an employee who receives tips and you will still have minimum wage protections if you get a new job where you don’t earn tips. Most importantly, your tips belong to you, not your employer. There are times when your employer can, to a limited extent, use your tips, but these moments are limited to two specific circumstances.

The first situation in which an employer can use your tips is via what is known as a tip credit. The second situation is when an employer requires that employees contribute to a tip pool shared among all employees.

Some states, Michigan included, let employers count tips as if your employer paid you what you earned in tips. You will always have a right to earn the complete minimum wage per hour under federal law, unless state law indicates a higher state minimum wage, in which case state law takes precedence.

This is important to remember in Michigan. While the federal minimum wage is currently $7.25 per hour, the state minimum wage in Michigan became $10.10 on January 1, 2023.

Your employer is allowed to pay you less than the minimum wage, but only if the tips you earn together with what your employer pays you together add up to the minimum wage. A “tip credit” is the amount you earn in tips, which your employer is allowed by state and federal law to count towards your wage.

However, you should keep in mind that if you don’t earn at least minimum wage between the reduced payment your employer gives you and your tips, your employer must pay you enough so that you earn minimum wage. Since the most worker-friendly law applies, this means Michigan’s state minimum wage is what your employer must ensure you earn.

After the recent adjustments to Michigan’s minimum wage in 2023, employers are required to pay at least $3.84 per hour. The inverse here is that employers are allowed to claim $6.26 as a tip credit, provided your wage is at least $10.10 per hour with tips.

If you believe that your employer has withheld your rightful pay in any respect, please don’t hesitate to contact Berger Law for assistance.

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