Overview: Employers may deduct employees’ cash wages below the rate required by minimum wage laws only under certain limited circumstances.
The most common is the tip credit, which allows employers to deduct up to $5.12 per hour from the cash wage paid directly to tipped employees as a credit for the tips they receive.
Employers also may deduct a certain amount of their employees’ cash wages for:
These deductions are all narrow in scope, and employers should review the requirements carefully before applying them.
Author: Michael Cardman, Legal Editor
Updated to reflect forthcoming increases in the minimum wage.
Updated to reflect an increase in Arkansas's minimum wage, effective January 1, 2017.
Updated to reflect a forthcoming amendment to the tip pools law.
Updated to include a forthcoming amendment regarding the subminimum wage for employees of seasonal amusement and recreational establishments.
Updated to include developments regarding employee retention of tips.
Updated to include a forthcoming amendment regarding the credit for tipped employees.
Updated to reflect increases in the state's three-region minimum wage, effective July 1, 2017.
HR guidance on complying with the FLSA requirements for deductions below the minimum wage.