Employment laws, and particularly minimum wage laws in the United States are not clear or straightforward to follow, especially when you are looking at the tipped minimum wage, and tipped employees in Hawaii.

Workers at restaurants, bars, hotels, cruise ships, and other service providers often expect to be paid a relatively small hourly wage supplemented heavily by tips (gratuities). There are many service-industry workers in Hawaii that base their entire pay on tips and rely on them to cover their living expenses and lifestyle.

So, What is a Tipped Hawaii Employee?

A tipped worker in Hawaii is somebody who earns their wages through tips rather than a fixed salary or higher hourly rate that meets or exceeds the minimum wage in the state. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.

For Hawaii, 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 (like bellhops and porters), valet car parking attendants, cruise ship workers, and more. The laws surrounding the definition of a Hawaii tipped employee follow the federal guidelines.

Tipped Employees and the Hawaii Tipped Minimum Wage

To comply with Hawaii 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 Hawaii tipped workers, also known as the Hawaii 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 Hawaii that will impact how employers handle tipped employees. Understanding the standard minimum wage in Hawaii, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal if you are already running or considering starting a service-related business with tipped employees.

Tipped minimum wage in Hawaii

The tipped minimum wage in Hawaii for 2021 is $9.35 per hour. The current minimum wage in Hawaii in 2021 is $10.10 per hour for non-tipped employees. Hawaii law requires the State of Hawaii Wage Standards Division to calculate a minimum wage increase each year. Certain employees that work overtime in Hawaii are also entitled to time and a half pay.

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 Hawaii employers.

Federal law requires that employers make tipped employees aware of the cash wage paid. They must also let them know about the tip credit, and explain any tip pooling systems at the workplace. Currently, the national direct hourly salary is only $2.13 per hour.

Due to Hawaii’s minimum wage rate being significantly higher than the federal minimum wage rate, the state laws in Hawaii supersede the federal regulations.

Tip Credits and the Minimum Cash Wage in Hawaii

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 Hawaii tip credit is only $0.75 per hour – tip credit in Hawaii is accepted if the combined amount an employee receives from their employer in tips is $7.00 more than the applicable minimum wage.

Let’s assume a tipped employee earned less than $7.00 per hour as their tipped wage. In that case, the employer must pay the difference between what they made and the total of $10.10 per hour.

A minimum cash wage ensures that tipped employees earn a wage, even if a slow workweek or other downturn occurs and they do not receive sufficient tips in a certain week or pay period. This minimum wage rate ensures that servers and others in tipped roles in Hawaii that do not make enough with tips can still earn a weekly wage when working full-time of $404 (Example: $10.10 x 40 hours).

How Does This Affect My Business?

If you are planning to start (or purchase) a new business in Hawaii due to the rising opportunities presented by the state or simply considering Hawaii as a place to live and work due to the incredible quality of life provided, 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 Hawaii, much the same as most other U.S. states, tipped jobs and the industries surrounding them are very important to the state’s economy, which is helped by the abundance of tourism Hawaii gets each year. Today there are just over 3,600 eating and drinking establishments in Hawaii, many of them small businesses, and there are more than 98,000 restaurant and food service jobs in the state, which is impressive when you consider the small size of this island state.

To learn more about the laws surrounding tipped employees from an employer and an employee perspective, you can contact the Hawaii Wage Standards Division. 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:

Hawaii Wage Standards Division
830 Punchbowl Street, Room 340
Honolulu, HI 96813

Telephone: (808) 586-8777