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 a minimum wage increase in Chicago, effective July 1, 2016.
Updated to reflect the establishment of the state's three-region minimum wage, effective July 1, 2016.
Updated to reflect an increase in the minimum wage for Johnson County, Iowa, effective May 1, 2016.
Updated to reflect forthcoming minimum wage requirements, which will raise the state minimum wage to $15 over the next six years.
Updated to reflect that Nevada's minimum wage will remain unchanged for 2016.
Updated to reflect an increase in Santa Fe's minimum wage, effective March 1, 2016.
Updated to include information on the 9th Circuit ruling Oregon Rest. & Lodging Ass'n v. Perez, which upheld a regulation that employees who do not customarily and regularly receive tips may not participate in a tip pool even if their employer does not claim a tip credit.
HR guidance on complying with the FLSA requirements for deductions below the minimum wage.