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Cyrus is a tipped employee in Illinois. He is single with one withholding allowance and the...

Cyrus is a tipped employee in Illinois. He is single with one withholding allowance and the minimum cash wage in Illinois is $4.95 per hour for a 40-hour workweek. The tip credit in Illinois is $3.30 per hour (i.e., the minimum wage in Illinois is $8.25 per hour), and tips are not included in overtime calculations. During a one-week period, Cyrus worked 52 hours and earned $180 in tips. What is his gross pay?

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Expert Solution

Under the Illinois Minimum Wage Law, the minimum wage is $8.25 per hour. If an employer wishes to take a tip credit, that employer must pay the tipped employee at least $4.95 per hour. The employer can then take a tip credit of no more than $3.30 towards its minimum wage obligations ($8.25-$4.95).

Again, the same tip credit that is applied to the straight-time minimum wage must be applied to the overtime rate.

In order to correctly calculate the overtime rate for tipped employees, we begin with the overtime rate for non-exempt employees generally. Under the IMWL, overtime must be paid at a rate of at least $12.38 ($8.25 x 1.5).

(Overtime Rate of pay is calculated by multiplying lower hourly rate with 1.5)

Next, we have to subtract the employer's tip credit which, under the Illinois Minimum Wage Law, cannot exceed $3.30.

The tipped employee's overtime rate, therefore, must be at least $9.08.(12.28 - 3.30)

Now, Cyrus's Gross Pay Calculation is as follows :

$4.95 x 40 Hours = $198

$9.08 x 12 hours = $108.96

Tips Earned = $180

Total Gross Pay = $198 + $108.96 + $180

= $486.96

ekkarill92 answered 1 year ago
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