Question

In: Accounting

Tipped Employees A tipped employee is one who engages in an occupation in which tips of...

Tipped Employees

A tipped employee is one who engages in an occupation in which tips of more the $30 a month are customarily and regularly received. An employer may consider, within prescribed limits, the tips received by a tipped employee as part of the employee's wages.

In 1996, the Small Business Job Protection Act froze the minimum cash wage required for tipped employees at $ per hour. If the employee receives more than $/month in tips, the employee is required to report their tips to the employer each month.

If tips received do not amount to at least $ per hour, the employer must increase the hourly rate of pay so hourly wage plus the equivalent hourly tip rate, at a minimum, equals $ per hour.

Let's assume that Carly Employee, Example's daughter, earns a weekly wage of $90 for a 40-hour workweek and received tips of $90 each week. Even though the hourly rate paid ($2.25^a) exceeds the minimum cash wage rate, the employer must pay an additional $110 so that tips received plus the wages paid equal the minimum wage.

Hours	Formula	Amount
Workweek @ minimum wage	Minimum wage ($7.25) x hours in workweek	$290.00
Weekly wage		90.00
Tips received		90.00
Extra weekly pay		$110.00

Minimum cash wage rate ($2.25^a) + Hourly wage pay rate ($5.00^b) must, at a minimum, equal the FLSA minimum hourly wage of $7.25.
^a $90 / 40 hours per workweek = $2.25 per hour.
^b ($90 + 110.00) / 40 hours per workweek = $5.00 per hour.

? Tackle It

Note: Round interim calculations to two decimal places. Use rounded amounts in subsequent computations. And, round your final answer to two decimal places.

Mia Hamm earns $87 a week for a 40-hour workweek. During one week, Mia received tips of $90. Complete the two statements below.

1.	What hourly rate is being paid to Mia?	$
2.	How much must the employer pay Mia in addition to her weekly wage?	$

Expert Solution

Weekly wage rate being paid to Mia Hamm = Earnings in a week / Total hours worked in a week

= $87 / 40 hours

= $2.185 per hour

Tips received by Mia Hamm during the week = $90

Weekly Wages received by Mia Hamm = $87

Total Weekly remuneration received by Mia Hamm = $90 + $87 = $177

Minimum wage remuneration that should have been given :

=Minimum wage ($7.25) x hours in workweek

=$7,25 * 40 hours

=$290

Therefore, Mia Hamm should have received $290 but she is receiving total remuneration = $177.

Therefore, excess amount to be paid by the employer = $290 - $177

= $113

ekkarill92 answered 2 years ago

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