The Tip Credit Processing Rule is used to calculate the employer's tip credit reduction based on an employee's cash tips and worked hours. The rule calculates the deduction for the tip credit by comparing the amount entered in the Maximum Tip Credit field in Pay Setup > Minimum Wages against the tips per hour worked value.
Tips per hour worked value = cash tips / hours worked
If the tips per hour worked value is greater than or equal to the maximum tip credit, the entire maximum tip credit can be claimed per hour worked. Consider an example where an employee earns $200 in cash tips for 30 hours worked and the maximum tip credit is $3.10. In this case, the tips per hour worked value is $6.6667 per hour (that is, 200/30). As the calculated amount is greater than the maximum tip credit, the entire $3.10 tip credit can be claimed per hour.
If the tips per hour worked value is less than the maximum tip credit, only a partial amount can be claimed. Consider an example where an employee earns $75 in cash tips for 30 hours worked and the maximum tip credit is $3.10. In this case, the tips per hour worked value is $2.50 per hour (that is, 75/30). As this amount is less than the maximum tip credit, only $2.50 worth of tip credit can be claimed per hour.
| Settings | Description |
|---|---|
| Top up pay code | The pay code that Dayforce assigns to the deduction for the tip credit after comparing the maximum tip credit amount against the tips per hour worked value. |
| Calculate tip credit at the end of calculation week Calculate tip credit at the end of calculation period |
Tip credits are usually calculated over the work week. However, you can configure whether you want them calculated at the end of the calculation week or at the end of the calculation period. For example, if you select the Calculate tip credit at the end of calculation week option, the tip credits would be calculated weekly, even if the calculation period is biweekly. |
| Apply tip credit based on job worked on | Select this checkbox and the rule engine checks if an employee has multiple work assignments and calculates their tip credit. The employee’s tip credit is calculated using the maximum tip credit rates of the work assignment where their hours were worked. This is useful for cases where employees have separate work assignments in two different states with differing maximum tip credit rates. |
| Tipped time pay codes eligible Tipped time pay codes ineligible |
The pay codes to include or exclude when calculating the time worked on tipped jobs. |
| Tipped time pay categories eligible Tipped time pay categories ineligible |
The pay categories to include or exclude when calculating the time worked on tipped jobs. |
| Tipped time include premiums | When selected, premiums count towards time worked on tipped jobs. |
| Tip Pay Codes eligible for Pay Adjustments | The tip pay codes that are eligible for pay adjustments. Dayforce includes these tips only when the Tipped time include premiums checkbox is selected. |
| Tip types eligible Tip types ineligible |
The tip type pay codes that count or don’t count towards the top up calculation. Note: You create tip types in the Tip Type tab of Pay Setup > Tips. See Add Tip Types. |