Running Payroll With Tip Credit Calculations

Effectively managing payroll for tipped employees involves adhering to tip credit regulations and ensuring precise pay reporting. This guide outlines how to process payroll with Tip Credit Calculations, whether using 7shifts Payroll or a third-party system.

Using 7shifts Payroll

If you're using 7shifts Payroll and have enabled Tip Credit Calculations, 7shifts will automatically calculate and process tip credit and shortage amounts when running payroll. To ensure accuracy, always verify your reporting before running payroll. Follow the guidelines below:

Step 1: Review Tip Credit Calculations

Before running payroll, examine the Tip Credit Calculations in the Worked Hours & Wages (WH&W) Report. Follow these steps:

1. Generate the WH&W Report: Pull the report for the relevant payroll period.

2. Review Key Columns:

   • Tip Credit: Indicates the required tips employees must earn to avoid a shortage.

   • Tip Shortage: Shows the amount the employer owes if tips do not meet the Tip Credit requirement.

Step 2: Automatic Processing

• System Automation: 7shifts Payroll automatically calculates and processes Tip Credit amounts.

• Direct Payments: The system ensures Tip Credit and any shortages are included directly in employee pay.

Not Using 7shifts Payroll

For employers using third-party payroll systems, Tip Credit Calculations from the Worked Hours & Wages Report must be handled manually. Here are the steps:

Step 1: Review Tip Credit Calculations

1. Generate the WH&W Report: Pull the report for the relevant payroll period.

2. Review Key Columns:

   • Tip Credit: Indicates the required tips employees must earn to avoid a shortage.

   • Tip Shortage: Shows the amount the employer owes if tips do not meet the Tip Credit requirement.

Step 2: Adjust Payments in Your Payroll System

1. Calculate and Adjust Payments: Use the Tip Credit and Tip Shortage amounts to adjust employee pay.

2. Ensure Compliance: Confirm all adjustments align with local wage laws.