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Restaurants & Hospitality: Overtime Rules and Payroll Compliance (2026)
Overtime in restaurants is time and one half after 40 hours on the regular rate, and the regular rate has to absorb tip credit and tip pooling and high turnover before the premium is applied. BEG runs restaurant payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
The overtime rules that apply to restaurants
A tipped employee is one who customarily and regularly receives more than $30 a month in tips. An employer taking a tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, and overtime for tipped employees must be calculated on the full $7.25 minimum wage, not the cash wage.
An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders. An employer that pays a full cash wage of at least $7.25 may include cooks and dishwashers in a mandatory pool, but managers and supervisors may not receive tips from any pool.
The 2021 dual jobs rule that limited tip credits when non-tipped support work exceeded 20 percent of the workweek or 30 continuous minutes was vacated by the Fifth Circuit on October 29, 2024. The Department of Labor removed that text from 29 CFR 531.56 and restored the original 1967 dual jobs regulation effective December 17, 2024.
A worked example at restaurant wages
Waiters and waitresses at the May 2025 national median of $35,230 earn about $17 an hour on a 2,080-hour year. Ten overtime hours in a week cost $254 at time and one half. If that week also carried tip credit and tip pooling, the amount folds into the regular rate first and the premium rises with it; leaving it out is the most common overtime error in this industry.
How the payroll is set up to get it right
Each pay component is flagged at setup as included in or excluded from the regular rate, hours are captured by workweek rather than pay period, and any industry exemption is applied per employee with the supporting record kept. Overtime is then arithmetic, not judgment, on every run.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- A tipped employee is one who customarily and regularly receives more than $30 a month in tips. An employer taking a tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, and overtime for tipped employees must be calculated on the full $7.25 minimum wage, not the cash wage. [DOL Fact Sheet #15]
- An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders. An employer that pays a full cash wage of at least $7.25 may include cooks and dishwashers in a mandatory pool, but managers and supervisors may not receive tips from any pool. [DOL Fact Sheet #15]
- The 2021 dual jobs rule that limited tip credits when non-tipped support work exceeded 20 percent of the workweek or 30 continuous minutes was vacated by the Fifth Circuit on October 29, 2024. The Department of Labor removed that text from 29 CFR 531.56 and restored the original 1967 dual jobs regulation effective December 17, 2024. [89 FR 101884 (December 17, 2024)]
Read the full guide to how to calculate overtime pay, and the rest of the restaurant payroll library.
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Frequently Asked Questions
Which restaurant employees are exempt from overtime?
A tipped employee is one who customarily and regularly receives more than $30 a month in tips. An employer taking a tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, and overtime for tipped employees must be calculated on the full $7.25 minimum wage, not the cash wage.
How is overtime calculated on tip credit and tip pooling?
tip credit and tip pooling is added to the week's straight-time pay, the total is divided by hours worked to get the regular rate, and the half-time premium is paid on that rate for every hour over 40. An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders.
What does an overtime hour cost at restaurant wages?
At the BLS May 2025 national median for waiters and waitresses, $35,230 a year or about $17 an hour, an overtime hour is $25 before any bonus or differential is added to the rate.
What does managed payroll cost for a restaurant?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Tip credit and tip pooling, high turnover and multiple pay rates are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Restaurants & Hospitality. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Overtime Pay Under the FLSA
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