Configuring tip credit rules

  1. Select Payroll Administrator > Setup > Tips > Tips Configuration > State Configurations
  2. Click Create or select and open the state configuration record to configure tip credit rules for.
    Note: State configurations should be set up for states that maintain a minimum tip credit threshold or maximum tip credit threshold limit.
  3. Specify this information:
    Country
    Specify a country for the state configuration.
    Tax Authority
    Specify the tax authority for the state configuration.
    Shortage Pay Code
    Optionally, specify a shortage pay code to override the shortage pay code defined on the Payment Schedule.
    Note: Shortage = Minimum Wage Due – (Cash Wage + Tips Reported)
  4. In the Tip Credit Rules section, click Create, then specify this information:
    Tip Credit Threshold
    Specify the amount of tips that the employee must receive per hour for the employer to use the tip credit.
    Note: 

    Hawaii requires that an employee receive a certain amount of tips per hour for the employee to take a tip credit when paying the employee.

    To use tip credits in Hawaii, there cannot be a shortage. The total wages and tips must equal $17.10 or higher. ($10.10 wages + $7.00 tips)

    Maximum Tip Credit Rate or Percent
    Specify the maximum tip credit an employer can receive.
    Note: You can specify the Maximum Tip Credit Rate or Maximum Tip Credit Percent, but not both. The rate or percent specified is used when calculating tips to determine the maximum tip credit amount.