Employment laws, and particularly minimum wage laws in the United States are not that easy to follow, especially when you are looking at the tipped minimum wage, and tipped employees in Michigan.

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). Many service-industry workers in Michigan base their entire pay on tips and rely on the generosity of customers to cover their living expenses and lifestyle.

What is a Tipped Michigan Employee?

A tipped worker in Michigan 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.

In Michigan, if an employee receives more than $30 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 Michigan, some hotel workers (like bellhops and porters), valet car parking attendants, some airport workers, and more. The laws surrounding the definition of a Michigan tipped employee follow the federal guidelines.

Tipped Employees and the Michigan Tipped Minimum Wage

To comply with Michigan minimum wage laws, employers must ensure that when including tips, their employees that are 18 years of age or older are being paid at the very least the state minimum wage rate set for Michigan tipped workers, which is higher than the federal minimum wage and, also known as the Michigan tipped minimum wage for employees. If those employees are not making the 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 Michigan that will impact how employers handle tipped employees. Understanding the standard minimum wage in Michigan, and how pay and wages work for tipped employees is pivotal if you are considering starting a service-related business with tipped employees.

Tipped minimum wage in Michigan

The tipped minimum wage in Michigan for 2022 is $3.75 per hour. The regular minimum wage in Michigan in 2022 for those over the age of 18 years old is $9.87 per hour for non-tipped employees. If employees work more than 40-hours per week then some of them are entitled to be paid Michigan overtime pay. This is called “time and a half pay” and is equal to one and a half times (1.5) an employee’s normal hourly wage.

Michigan law requires the Michigan Fair Labor Standards Division 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.

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 Michigan 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.

Tip Credits and the Minimum Cash Wage in Michigan

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 Michigan tip credit is currently $6.12 per hour – this means that employers can claim a $6.12 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $9.87 minimum wage into a $3.75 per hour minimum wage that employers must pay to tipped employees no matter how much more they earn in tips.

Let’s assume a tipped employee earned less than $3.75 per hour across a pay period as their tipped wage (the minimum cash wage). In that case, the employer must pay the difference between what they made and the total of $9.87 per hour, which is the tipped credit.

A minimum cash wage ensures that Michigan 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 Michigan that do not make enough with tips can still earn at least a weekly wage when working full-time of $394.80 ($9.87 x 40 hours).

Alternatively, some tipped employees in Michigan will work more than 40 hours per week, especially if they are covering shifts for other employees, and may qualify for overtime pay.

How Does This Affect My Business?

If you are planning to start (or purchase) a new small business in Michigan due to the abundance of brilliant business opportunities presented by the Great Lake State, or simply considering Michigan as a place to live and work due to the tremendous quality of life on offer, 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 Michigan, much the same as most other U.S. states, tipped jobs and the industries surrounding them are important to the state’s economy. Today there are just over 4,500 eating and drinking establishments in Michigan, and there are more than 423,000+ restaurant and food service jobs in the state.

If you have a claim related to employment, you can find out more information on the Michigan Department of Labor and Opportunity website. You can also file a complaint if you feel you are not being paid the correct minimum wage or overtime rate.