Employment laws, and in particular minimum wage laws in the U.S. are not particularly clear or straightforward to follow especially when it comes to the tipped minimum wage, and tipped employees in Arkansas.
While tipping certainly isn’t the most common practice in many other countries around the world, thousands of workers make the majority of their income through tips in the United States.
Workers at restaurants, bars, and other service providers often expect to be paid a relatively small hourly wage supplemented heavily by tips (also known as gratuities). Many service-industry workers in Arkansas base their entire pay on tips and rely on them to cover their living expenses.
Hospitality workers, including restaurant, bar, cafe, certain hotel workers, and other service provider employees typically expect to be paid a small hourly wage that is supplemented heavily by tips (gratuities). This is why it is important to understand the minimum wage in Arkansas for tipped employees.
So, What Makes a Tipped Arkansas Employee?
A tipped worker is someone who earns their wages through tips rather than a fixed salary or higher hourly rate. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.
For Arkansas, if an employee receives more than $20 per month in tips, they are considered to be a tipped employee by federal standards. These employees often include workers such as bartenders, servers in restaurants, some hotel workers, valet car parking attendants, and others. The Arkansas laws surrounding the definition of a tipped employee follow the federal guidelines.
Tipped Employees and the Arkansas Tipped Minimum Wage
To comply with Arkansas minimum wage laws, employers must ensure that when including tips, their employees are being paid at the very least the state minimum wage rate set for Arkansas tipped workers, also known as the Arkansas tipped minimum wage for employees. If those employees are not making that minimum pay rate, it is then the employer’s responsibility to make up the difference.
There are many factors that contribute to the employment law in Arkansas that will impact how employers handle tipped employees. Understanding the regular minimum wage in Arkansas, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal if you are considering starting a service-related business with tipped employees.
The tipped minimum wage in Arkansas is $2.63 per hour. The current minimum wage in Arkansas is $11.00 per hour for non-tipped employees. Arkansas law requires the Arkansas Department of Labor & Licensing to calculate a minimum wage increase each year. The annual calculation is based on the percentage increase in the state’s Consumer Price Index (CPI) previous 12-month period from when the calculation occurs.
The CPI is calculated based on what consumers pay for goods, house price increases, and other significant financial factors. The minimum wage for both tipped and non-tipped employees in Arkansas rises based on the CPI.
Fair Labor Standards Act (FLSA) and Tipped Employees
The Federal Fair Labor Standards Act, also known as the FLSA, is a federal law from the U.S. Department of Labor. This law establishes a national minimum wage, defines classifications for employees, and covers other essential standards and requirements for Arkansas employers.
Federal law requires that employers make tipped employees aware of the cash wage paid (currently, the national direct hourly salary is only $2.13 per hour), let them know about the tip credit, and explain any tip pooling systems at the workplace. Due to Arkansas’s minimum wage rate being higher than the federal minimum wage rate, the state laws supersede the federal regulations.
Tipped Employees, Tip Credits, and other Considerations for Employers in Arkansas
Since the rules for tipped employees are different than non-tipped employees, there are other ways that employers can calculate the minimum amount earned by a tipped employee. One of these ways is through tip credits.
The Arkansas tip credit is currently $8.37 per hour – this means that employers can claim a $8.37 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $11.00 minimum wage into a $2.63 per hour minimum wage that employers must pay to tipped employees no matter how much they earn.
Let’s assume a tipped employee earned less than $2.63 per hour as their tipped wage (the miniimum cash wage). In that case, the employer must pay the difference between what they made and the total $11.00 per hour.
A minimum cash wage ensures that tipped employees earn a wage, even if a slow workweek or other downturn occurs and they cannot receive sufficient tips in a certain week or time period. This minimum wage rate ensures that servers and others in tipped roles in Arkansas that do not make enough with tips can still earn a weekly wage when working full-time of $440 ($11.00 x 40 hours).
How Does This Affect My Business?
If you are planning to start (or purchase) a new business in Arkansas due to the awesome opportunities the state has to offer or simply considering Arkansas as a place to live and work, you should certainly take this information about tipped employees and the state minimum wage into account.
While you may want to speak with an employment attorney or accounting firm for legal and tax advice about your business, understanding the minimum wage laws for tipped employees can help you make an informed decision whether or not the state is right for you and your future plans.
In Arkansas, much the same as most other U.S. states, tipped jobs are a mainstay of the economy and accessible for those seeking employment given the tourism-heavy nature of the Arkansas economy in addition to the eating-out culture of the state. Today there are just over 5,288 eating and drinking establishments in Arkansas, and there are more than 121,000 restaurant and food service jobs in the state.
To learn more about the laws surrounding tipped employees from an employer and an employee perspective, you can contact the Arkansas Department of Labor & Licensing. You can also file a complaint if you feel you are not being paid the correct minimum wage or overtime rate. Here are the contact details:
Arkansas Department of Labor and Licensing
900 West Capitol Avenue
Little Rock, AR 72201-3108