Tip Credit Calculations

Specify which roles are tipped roles, and we'll automatically calculate tip credits/shortages to bridge the gap with your state's minimum wage rate. Simplify your payroll process and eliminate the need for manual calculation!


⚠️ Tip Credit Calculations are only available for Accounts located in the U.S.

⚠️ Tip Credit Calculations are not applicable to the following states: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.

⚠️ Only Admins and Managers/Assistant Managers with permissions (Can run reports, Can manage roles) can access Tipped Credit Calculations.

⚠️ Wage-based roles must be enabled to use Tip Credit Calculations.



Enable Tip Credit Calculations

Run Payroll

Reports and Tip Credit Calculations


Here's a list of terms you may encounter during your Tip Credit Calculations setup journey:

Tipped Minimum Wage -The tipped minimum wage in the US refers to the hourly wage that employers are required to pay tipped employees before factoring in tips. Tipped employees must receive a minimum wage of $2.13 per hour, however, the minimum and maximum tipped wages/credits vary across states and cities. 

It is recommended that you validate your state’s minimum wage for tipped employees. Visit the Department of Labor's website here.

Wage-based Roles - This setting allows employees to have different hourly wages for each role.

Tipped Role - Employees in tipped roles can receive a lower base wage with the expectation that tips will make up the difference to meet or exceed minimum wage.

Tip Credit - Columns located in your Worked Hours and Wages report that indicates the total amount of the employee's pay that the Employer is required to make up for with the Employee's tips. It is the difference between the state minimum wage and the Employee's current wage.

Tip Shortage -  Columns located in your Worked Hours and Wages report that indicates the amount that the Employer owes the Employee if their Tips Earned does not fulfill the total Tip Credit that the Employer is taking. Or rather, if the tips earned do not equal or exceed the tip credit.  Tip shortage is calculated on a weekly basis, based on your payroll cycle.

Tips Earned - The total amount of tips the Employee earned while working in their tipped roles over the past week. 

Enable Tip Credit Calculations

  1. Login as an Admin.

  2.  In the left navigation bar, head to Settings (or, click on your profile photo) > Company Settings > Labor & Compliance:

  3. Scroll to the section Wages & Pay > ensure Wage-based roles is enabled. Click here to learn more! :

  4. Enable Tip credit calculations:

  5. Scroll to the bottom and hit Save!

  6. Next, select Set up tipped roles:

  7. Once redirected to the Roles setting page, use the Tipped Role toggles to enable tipped employee roles:  

    You can also enable a Tipped Role while creating a new role! Click on the + Add Role button on this page to fill out the role's details:

  8.  You're done! Screenshot 2023-07-18 at 4.22.09 PM.png

Run Payroll

If you're using 7shifts Payroll:

Tip Credit Calculations will be done automatically and paid directly to Employees.

Learn more about 7shifts Payroll here. Already a 7shifts Payroll user? Click here to run Payroll!

If you're not using 7shifts Payroll:

Tip credit calculations will be done automatically and can be viewed in the Worked Hour and Wages report.

Reports and Tip Credit Calculations

When you're ready to pull a report on Tip Credit Calculations, head over to Reports > Worked Hours and Wages > use the filters to narrow down your search results  > click Get Reports.

⚠️ If the date range you have selected is partway through a tip pool period or tip credit calculation timeframe, employees’ tips to be paid and tip shortage may be inaccurate.


Was this article helpful?
0 out of 0 found this helpful