Payroll & Tip Question

[wood]

So I presently process tips for my employees through my payroll service.
They provide the amount, I pass it on when I call in my hours.

I was wondering, can I remove myself from the tip processing through my payroll? If so, what do my employees need to do? At year end they supply their tax accountant a number for the year and they should keep a weekly record? If I eliminate my involvement do I need some form completed, or supplied to them for tips?

In addition, If I do this, I have 3 employees who are a little below minimum. Would I then give them the additional hourly wage difference to get them to the state minimum?

Appreciate any help.

Wood

 

[Washmee]

Your employees are required by law to report their tips to you on a weekly basis. You are required to report them on their w-2 and to pay the employers share of Fica and Medicare taxes. Failure to report the tips and pay the taxes could result in you being responsible for all the taxes and penalties(including the employees share).

 

[wood]

Thanks Washmee. That was the assumption I always made. I had a temp help and payroll service stop bye and he was trying to suggest otherwise. Maybe he was talking the "independent" employee concept, which I don't plan on exploring.

Wood

 

[robert roman]

My comments are based on assumption this is carwash operation.

When I operated carwash, generally there were between 15 and 40 employees on payroll depending on time of year, etc.

We found it more transparent and easier to address tips using collection boxes where tips would be audited at COB by cashier and management, documented and then distributed to hourly employees based on hours worked per week.

There are several good reasons for this approach.

The method minimizes divisiveness and improves employee morale because finishing line positions of wash are more conducive to customers tips than, say, vacuum or prep area.

Equity in tips is also more goal-oriented. For example, an individual employee’s agenda might be to maximize their tips at the expense of the overall performance of the business.

Equity in tips also helps minimize problem of reconciliation as in meeting minimum wage requirements if you are paying server’s wages versus a standard hourly wage.

In other words, equity in tips allows for better control by management.

 

[rph9168]

I am not sure if the laws pertaining to tips are federal or if they vary from state to state but when I was General Manager of a chain in Arizona, by law management could not handle the tips. Only hourly, non-management could deal with the tips. In our case the cashier counted the tips and they were distributed much like Robert suggests by hours worked.

 

[jfmoran]

In addition, If I do this, I have 3 employees who are a little below minimum. Would I then give them the additional hourly wage difference to get them to the state minimum?

Appreciate any help.

Wood[/QUOTE]

If you haven''t already, you need to correct this immediatley. You can not pay workers below minimum wage and make up the difference with tips.

 

[rph9168]

Many restaurants pay below the minimum and count tips that are claimed into wages. The problem comes with cash tips not reported. Since unreported tips do not show as income I believe all that is required that you make up the difference if they are short of the minimum wage.

 

[jfmoran]

Many restaurants pay below the minimum and count tips that are claimed into wages. The problem comes with cash tips not reported. Since unreported tips do not show as income I believe all that is required that you make up the difference if they are short of the minimum wage.

Restaurants are exempt under Federal Minimum Wage Laws, car washes are not.
There are car washes in California within the last couple of years that have gotten
Caught for this, in fact they were making their workers work,
For tips only.

Car washes must pay minimum wage whether Federal or State,
Whichever is higher, tips can not be used to make up their hourly rate.