Calculating wages when earning tips
About this video
Rosa earns a tipped cash wage of $2.13 an hour plus tips. The law says her wage plus tips must add up to at least the $7.25 federal minimum wage. She made 2.13 x 32 + 150 = $218.16 but should have at least 7.25 x 32 = $232, so her employer must add $13.84 in make-up pay.
You'll be able to
- explain the rule that tipped wage plus tips must reach minimum wage.
- calculate actual earnings from a tipped wage and tips.
- calculate make-up pay when earnings fall short of minimum wage.
Key words
- Tipped cash wage
- A lower hourly wage paid to workers who also receive tips.
- Make-up pay
- Money the employer adds so wage plus tips reach at least minimum wage.
- Federal minimum wage
- The lowest hourly pay allowed by US federal law, $7.25 at the time of the video.
Transcript
- [Instructor] Rosa works as a barista at a cafe. She earns a tipped cash wage of $2.13 per hour. This week she worked 32 hours and earned $150 in tips. The minimum wage is $7.25 per hour. How much make-up pay must Rosa's employer add? Pause this video and try to calculate that for Rosa.
All right, so let's just make sure we understand what's going on. So, $7.25, at least at the time of this video, is the federal minimum wage, and the federal law at the time of this video, says that regardless of what your hourly wage is, and when we say it's a cash, a tipped cash wage, you're making this amount per hour plus tips.
You might notice this is well below the federal minimum wage. So the law says, that when you add the tips plus the hourly wage together, it needs to be at least equivalent to the minimum wage. So let's see what Rosa actually made, and then let's see what she should have made if she worked 32 hours at the federal minimum wage, and then of course, we will look at the difference.
The difference would be the make-up pay, if the minimum wage would have been more. So, let's see, she actually made, let me write it here. Actual. She made, it would be $2.13 times 32 hours. 32 hours. And then to that you would add $150 in tips. So let's calculate that and get the calculator out.
So we have $2.13 an hour times 32 hours is equal to this, plus $150. So she made $218.16. So this is $218.16. Now what she should make, that's going to be the federal minimum wage, $7.25 times 32 hours. 32 hours. And that is going to be equal to get the calculator out again, and we have 32 times $7.25 is equal to 232.
232. And so the makeup pay notice, 232, what she should make is more than 218. If it was less, then there would be no make-up pay, but it's more so how much more is it? Well, we can just subtract from 232 $218.16, and we see $13.84 of make-up pay that Rosa's employer needs to add.
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