Restaurant Overtime Calculator
Tipped overtime is the single most miscalculated figure in restaurant payroll, and the mistake is always in the same direction. The intuitive move is to take the cash wage — federally as low as $2.13 — and multiply it by 1.5, giving $3.20 an hour for overtime. That is wrong. Under the FLSA the overtime rate is built from the full minimum wage of $7.25, and only then is the tip credit subtracted.
The correct federal figure is $7.25 × 1.5 = $10.88, less the $5.12 tip credit, leaving $5.76 in cash for each overtime hour. That is nearly $2.60 an hour more than the naive calculation, and on a server working ten overtime hours a week it compounds into a meaningful liability over a year. Use the calculator for straight hourly staff, and the tables below for tipped roles.
FLSA is 40.
1.5 = time and a half.
Nondiscretionary pay must be folded into the regular rate.
Total pay for the week
$832.00
Includes $64.00 of overtime premium.
- Regular rate
- $16.00
- Straight time (40 hrs)
- $640.00
- Overtime (8 hrs)
- $192.00
At $24.00 per hour.
Estimates based on FLSA rules. State law may require more, exemption status affects whether overtime is owed at all, and this is not legal advice — check your jurisdiction.
Starting values are set for a typical restaurants scenario — change any field to match yours. Need the plain version? Overtime Calculator.
The tipped overtime calculation, done correctly
The rule is that the tip credit taken during overtime hours must be the same as the credit taken during straight-time hours. It is subtracted after the multiplier is applied to the minimum wage, never before.
| Step | Calculation | Result |
|---|---|---|
| Applicable minimum wage | Federal | $7.25 |
| Tip credit claimed | $7.25 − $2.13 | $5.12 |
| Overtime rate on minimum wage | $7.25 × 1.5 | $10.88 |
| Cash owed per overtime hour | $10.88 − $5.12 | $5.76 |
| The common error | $2.13 × 1.5 | $3.20 |
| Underpayment per overtime hour | $5.76 − $3.20 | $2.56 |
The tip credit only holds if tips actually cover it
Claiming a tip credit is conditional. If cash wages plus tips do not reach the applicable minimum wage for every hour worked in the workweek, the employer must make up the difference.
- A server paid $2.13 for 40 hours receives $85.20 in cash and needs $204.80 in tips to reach $7.25 an hour. A slow week where tips fall short obliges the employer to top up.
- The test is per workweek, not per shift or per year — a strong Saturday does not cure a shortfall measured across the week.
- Employees must be notified of the tip credit provisions before it can be claimed. Missing notice invalidates the credit entirely, meaning full minimum wage is owed for all hours.
- Tip pooling is permitted within limits, but employers, managers and supervisors may not keep any portion of employees' tips regardless of whether a credit is claimed.
- Many states set a higher minimum cash wage than $2.13, and several do not allow a tip credit at all. Where a state figure is higher, use the state figure.
Where restaurant payroll goes wrong
- Service charges are not tips. A mandatory gratuity added to a bill is generally the employer's revenue, and if distributed to staff it counts as wages that must be included in the regular rate — which raises the overtime rate.
- Non-discretionary bonuses for upselling or attendance must be folded into the regular rate, same as any other industry.
- Employees who work both tipped and non-tipped roles may need different rates for different hours, with the overtime rate computed on a weighted average.
- Off-the-clock side work — rolling silverware, closing duties, mandatory pre-shift meetings — is hours worked, and it is what pushes a 38-hour schedule past 40.
- Uniform and tool deductions cannot reduce a tipped employee below minimum wage, and cannot come out of the overtime premium at all.
Frequently asked questions
- How do you calculate overtime for a tipped employee?
- Multiply the full applicable minimum wage by 1.5, then subtract the tip credit. Federally that is $7.25 × 1.5 = $10.88, less a $5.12 credit, leaving $5.76 in cash per overtime hour. Never multiply the reduced cash wage by 1.5 — that underpays by about $2.56 an hour.
- Is overtime based on $2.13 or $7.25?
- On $7.25, the full federal minimum wage, or a higher state minimum if one applies. The $2.13 cash wage is only the direct payment floor; the overtime premium is calculated on the full minimum wage before the tip credit is applied.
- What if a server's tips don't reach minimum wage?
- The employer must make up the difference for that workweek. Cash wages plus tips have to equal at least the applicable minimum wage for every hour worked, and the test is applied weekly rather than averaged across a longer period.
- Do service charges count as tips?
- Generally no. A mandatory service charge is usually the employer's revenue rather than a tip. If it is paid out to employees it counts as wages and must be included in the regular rate, which increases the overtime rate — a distinction that frequently gets missed.
- Can managers share in a tip pool?
- No. Employers, managers and supervisors may not keep any portion of employees' tips, whether or not a tip credit is claimed. This is one of the clearer prohibitions in the tip rules and carries significant penalties.
- What about employees who do both tipped and untipped work?
- Where someone works at two different rates in a workweek, overtime is generally computed on a weighted average of the rates. Track hours by role rather than applying one blended assumption, and be aware that the rules on when tipped work qualifies for the credit have been subject to litigation — check current guidance.