The manager who writes the schedule also answers for the pay. These are the points that cause trouble in restaurants.
In the federal tip-credit system, an employer can pay $2.13 an hour in cash wages if tips bring the total to the minimum wage. The credit applies to time spent in a tipped occupation. Time spent on directly supporting work, such as setting tables and rolling silverware, is generally treated as part of the tipped job as long as it is not a substantial part. A 2021 Department of Labor rule limited side work with a 20 percent of the workweek test and a 30 continuous minute limit, but a federal appeals court vacated that rule in 2024, so confirm the current federal and state rules with a professional. In any case, a server who spends two hours on a Tuesday morning deep cleaning the walk-in is doing a non-tipped task.
| Time | Task | Treated as |
|---|---|---|
| 10:00 to 10:45 | Setup, roll silverware | Tipped job, side work |
| 10:45 to 12:00 | Slicing lemons, restocking | Tipped job, side work |
| 12:00 to 2:00 | Serving | Tipped |
| 2:00 to 4:00 | Deep cleaning | Non-tipped, full minimum wage |
Servers do not leave when the last guest does. They cash out, split tips, clean and reset. The clock should run until they actually go. If the closing time is regularly an hour after the schedule, write it into the schedule.
Some cities and states require advance notice of schedules, extra pay for last-minute changes and rest between closing and opening shifts. These laws often cover food service. If you operate in one of those places, the published time and each change must be recorded.
Cooks working 55 hours cost more than the same hours split across two people. The weekly total on the schedule, visible before you publish it, prevents the surprise. Cross-training servers to cover prep can help, but a person who works in two jobs at different rates is paid overtime on the blended rate.
An assistant manager may be salaried and still owed overtime if most of the time is spent on non-management work such as cooking or serving. The label does not decide the question.
A mandatory service charge added to a banquet bill is not the same as a tip under many rules. Treat it as revenue and pay staff from it as wages, with payroll taxes. Voluntary tips left by guests belong to staff. Label each correctly on the check and in the records, and explain the difference in your handbook, since guests and staff often confuse the two.
Tip rules in the United States come from the Fair Labor Standards Act, enforced by the U.S. Department of Labor, from IRS reporting rules and from state law, which is often stricter. Several states, including California, Washington, Oregon, Nevada and Minnesota, do not allow a tip credit at all.
| Rule | Agency | What it means on the floor |
|---|---|---|
| Tip credit, FLSA section 3(m) | U.S. Department of Labor | Cash wage of at least $2.13 an hour; maximum credit $5.12; tips must make up the rest of the $7.25 minimum |
| Managers may not keep tips | U.S. Department of Labor | Owners, managers and supervisors cannot take a share of the tip pool |
| Pools with back-of-house | U.S. Department of Labor | Cooks and dishwashers may share a pool only if no tip credit is taken |
| Employee tip reports | Internal Revenue Service | Employees who receive $20 or more in tips in a month report them to the employer by the 10th of the next month |
| Form 8027 | Internal Revenue Service | Large food or beverage establishments where tipping is customary file an annual tip report |
The numbers are fictional and use federal rules only. A server works 32 hours in a week at a $2.13 cash wage and reports $160 in tips. The minimum for the week is 32 × $7.25 = $232.00. Cash wages are $68.16, and with tips the total is $228.16, which is $3.84 short.
| Item | Amount |
|---|---|
| Hours worked | 32 |
| Cash wages at $2.13 | $68.16 |
| Reported tips | $160.00 |
| Total | $228.16 |
| Federal minimum for 32 hours | $232.00 |
| Employer top-up owed | $3.84 |
Slow lunch shifts are where this happens. Check every tipped employee every week, not once a quarter. Our tip credit calculator runs the same check.
Set aside fifteen minutes after the last service of the week. Check that every tipped employee met the minimum wage for each workweek, that no one with management duties appears in the tip pool, and that long blocks of non-tipped work were paid at the full rate. Compare card tips paid out with the card tips in your sales report. Then scan the next week’s schedule for anyone heading over 40 hours and any closing shift followed by an early opening. A short, regular review costs far less than reconstructing a year of tips during an audit.
EZTime lets the floor team clock in on a tablet kiosk or the mobile app, with the schedule linked to the clock so early clock-ins can be blocked. Meal and rest breaks are tracked with alerts when a required break is missed. Shift swaps and open shifts go through manager approval, and real-time labor costing shows the week’s cost before you publish the schedule. EzTip handles tip pooling, and reports export to Excel or PDF for payroll.
They should clock in when they begin work, including setup.
Employees who customarily receive tips. Managers and owners generally may not.
Record the time, pay for hours worked and write a short note on what happened.
Under federal rules you may reduce card tips by the proportional processing fee the card company charges, but no more. Some states do not allow this, so check your state.
Under federal rules, tips must be paid out no later than the regular payday for the period. Many restaurants pay them in each paycheck.
Weekly overtime math
Wages as a share of revenue
Where overtime starts each day
Book a demo and we will build a week with tipped and non-tipped time tracked.
This page is general information, not legal, payroll or tax advice. Rules differ by state, city and contract, and they change. Check with a qualified professional before you act. Numbers in examples are made up.