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Sarah R. Bratko, Esq.
Vice President of Advocacy and General Counsel
401-223-1120, ext. 115
Tip-vs.-wage changes. On January 1, 2014 a new IRS rule took effect regarding automatically added gratuities. It basically states that any gratuities added to guest checks (such as an 18% gratuity added for large parties) will no longer be classified as "tips". It will instead be classified as a "service charge".
This means that it will need to: be recorded as business income; be subject to sales tax; and later when paid out to the employee, it will need to be treated as wages subject to all the normal payroll taxes.
Before this rule, automatic gratuities were classified as tips and it was up to the employee to report the income. After January 1, 2014 - these gratuities will not be available at the time it is charged but instead will later be included on the employees paycheck and paid out on payday. This will cause headaches for both the employer and the employee.
For the employee, this income will not be available until payday. For the employer, there will be additional payroll taxes to be paid. Another major issue is the new "service charge" is not counted as a tip for the is FICA tip credit. And there will be other consequences related to minimum wage and workmen's compensation insurance premiums.
This will cause most, if not all tipped establishments to rethink the automatic tip "add on", thereby leaving the tipped employee at the mercy of bad tippers. Also, for employees with wage garnishments, there will be more pay available to be deducted to pay those garnishments. -Norman LeBlanc-
Kahn, Litwin, Renza & Co., Ltd.
Old bulb shortage? In accordance with a 2007 federal law, 40 and 60-watt incandescent light bulbs can no longer be manufactured within the United States or supplied by importers. If that's a head-scratcher, consider that resupplying 75 and 100-watt bulbs in wholesale quantities has been verboten. The objective is to gently nudge the nation toward more efficient types of bulbs. Unfortunately, many of the alternatives have a higher price tag, though they use less energy and last exponentially longer.
Increase in Minimum Wage As of January 1, 2014 an increased minimum wage will take effect.
The Rhode Island Minimum Wage Law requires all employers to pay wages no less than those indicated in the following schedule. Please note that both Federal and State Laws have been reviewed. Whichever law is best for the employee prevails.
$8.00 / hour
Employees that are directly / indirectly tipped by the customer may be paid under the conditions below:
$2.89 / hour
(difference between minimum wage $8.00 and tip wage $2.89)
TDI Tax Rate to Rise in starting July 1, 2014
Caregiver Insurance law will be paid for with increase in TDI Insurance. The law provides up to four weeks of benefits for workers who need to care for a family member. Read moreBills:S 231B; H 5889Aaa