2024: How Massachusetts Restaurants Can Automate Calculation of Tipped Wages at End of Every Shift!

Massachusetts legislation requires more administrative work for service industry companies while software solution seeks to mitigate the impact.

In June of 2018, Massachusetts Governor Charlie Baker signed into law An Act Relative to Minimum Wage, Paid Family Medical Leave and the Sales Tax Holiday. Known as part of the “grand bargain” bill, one of its measures, which went into effect on January 1, 2019, requires employers with tipped staff to calculate each employee’s tipped wages at the end of each day’s shift rather than at the end of each pay period. Although the provision has been in effect for a year, many employers are still wrapping their arms around the change. Furthermore, the change requires additional administrative work regarding how organizations track and report tips for select service staff.

The difference with the new law

With this law, employers are no longer able to calculate employee tips at the end of every pay period but must now do so at the end of every shift.

For example, in 2020, the state’s minimum wage is $12.75 while the tipped minimum wage, or service rate, is $4.95. (Nb: The state will increase the minimum wage by $0.75 and the service rate by $0.60 annually until 2023, bringing both minimums to $15 and $6.75, respectively.)

The annual hourly wage changes, along with the daily tip reporting requirements, has made tracking and reporting of staff tips potentially burdensome for the majority of employers. The Massachusetts Attorney General’s office has outlined the details of the law’s provisions and provided an example of what employers may see as they comply with the new requirements. Keep in mind that the following calculations can be simplified by using a tool such as TipMetric, allowing employers to save time and streamline changes.

For 2020, the calculation under the new law would be as follows:

· The state’s minimum wage is $12.75 per hour and the service rate is $4.95 per hour.

· A restaurant server works one 5-hour shift on Tuesday and one 5-hour shift on Saturday during the same pay week

· On Tuesday, the slow day, the employee earns $24.75 in service rate wages + $20.00 in tips for a total earned of $44.75

· The law requires that the employee receive at least $63.75 for the shift (5 hours x $12.75 minimum wage rate)

· The employer is required to add $19.00 to the employee’s next paycheck to cover the differential for this shift

· On Saturday, the busy day, the employee earns $24.75 in service rate wages + $100 in tips for a total earned of $124.75. Since this total exceeds the $12.75 per hour minimum wage rate for each hour worked, the employer is not required to add any amount to the employee’s next paycheck for this shift.

· Total gross wages to be paid to this employee for this pay week = $188.50

Prior to January 1, 2019, employers would not have been required to pay the additional $19.00 in wages. The $124.75 earned during the busy day on Saturday would have satisfied the minimum wage requirements when calculated at the end of the pay period. As the example illustrates, calculating tipped wages at the end of every shift will require additional administrative work and likely increase employee compensation. An easy to use, cloud-based solution such as TipMetric will make it easier for Massachusetts-based restaurants to comply with the increased frequency of calculating wages for tipped employees.

If claiming a tip credit, employers must notify impacted employees in writing of the tip credit and how it works. In addition, employees must regularly earn tips of at least $20 per month and must retain those tips or share tips via a tip-pooling arrangement. Finally, the service rate amount and the tips received by the employee together must equal or be greater than the state’s minimum wage amount. If that total amount is less than the state’s minimum wage, the employer must make up the difference.

No matter the type of service organization or number of employees, TipMetric is the simple, online and mobile solution for accurately calculating, tracking & reporting tips for staff in virtually every service environment. TipMetric helps restaurants, hotels and other service organizations eliminate mistakes, reduce tip disputes and liabilities, and save time processing payroll.