2025 Updates: Minimum Wage for Tipped Employees and NYS Tip Credit

2025 Updates: Minimum Wage for Tipped Employees and NYS Tip Credit

Despite some controversy, the minimum wage for tipped employees in New York State remains in place as of early 2025, with wage rates increasing from last year.

Beginning January 1, 2025, the minimum wage rate for tipped food-service workers increased from $10.65 to $11.00 per hour in New York City, Westchester, and Long Island, and from $10.00 to $10.35 per hour in the rest of the state. The new wage rates will apply through December 31, 2025.

The State continues to see push-back from lawmakers and restaurant workers advocating for an end to the tiered wage system for tipped workers in New York. Last month, a group of restaurant workers gathered at the State Capitol in Albany to campaign for “One Fair Wage” legislation, a bill that would require employers to pay tipped workers the full minimum wage. Proponents of the bill have expressed concern about workers’ reliance on unpredictable tips to support themselves and their families. Under the proposed legislation, any tips earned by employees would be earned in addition to full minimum wage.

Seven U.S. states currently require that tipped employees be paid full minimum wage before tips, while the others—including New York—maintain a tiered wage system.

Hospitality employers in New York State are able to pay less than the full state minimum wage because of tip credits. Employers can satisfy minimum wage requirements through a combination of employer-paid wages and a tip allowance, or tip credit.

For example, the current minimum wage for food service workers in New York State is $15.50 per hour. Employers can satisfy the minimum wage by combining a cash wage of at least $10.35 with a tip allowance of no more than $5.15 per hour.

Below is some important information about tips and tip credits in New York:

What is a tip?

Any amount of money a customer voluntarily leaves above the ticket price plus tax is considered a tip.

What is a tip credit?

A tip credit allows employers to pay food service workers a rate that’s lower than minimum wage by including tips or a portion of them in wage calculations. Foodservice workers’ combined wage plus tips must equal at least the full minimum wage; otherwise, the employer must make up the difference.

Who owns a tip?

A tip belongs to an employee–not an employer. An employer is not entitled to take any part of a tip, except for a percentage of tips for a valid tip pool.

Who is considered a tipped worker?

The Fair Labor Standards Act (FLSA) defines a tipped employee as “an employee engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.”

Are there tip recordkeeping and reporting requirements?

Yes, reporting requirements help ensure compliance with state and federal wage and hour laws and provide proof that employers are upholding minimum wage requirements. Under New York Labor Law Section 196-d, employers are required to maintain daily records of the tips received by employees, records which are subject to DOL inspections. Employee wage statements must also clearly show how much of an individual’s pay is comprised of tips and how much is comprised of employer-paid wages. In addition, written notice must be provided to new employees informing them of wage rates and tip credits. Accurate recordkeeping and reporting are crucial, as employers not complying with New York tip laws can face serious penalties.

Have questions?

As mentioned at the start of the article, the future of tip credits in New York is unknown—but as of right now they still exist, and accurate recordkeeping is imperative. More information can be found in the Department of Labor’s Tips and Gratuities Frequently Asked Questions. If you have any further questions about the laws governing tips in NYS, we encourage you to seek legal counsel.

And remember, for all of your accounting, tax, audit, and advisory needs, RBT CPAs is here to help. Give us a call today and find out how we can be Remarkably Better Together.

How and Why to Create a Union Budget

How and Why to Create a Union Budget

Why Should You Prepare a Budget?

Budgeting is a critical component of any organization. The American Federation of Government Employees discusses several reasons why preparing a detailed budget for your union is important:

  1. A well-formed budget helps to ensure the financial health and security of your organization.
  2. A budget acts as a guide for leadership when making financial decisions.
  3. Union members want to know where their membership dues are going. Making the flow of money visible to members indicates transparency and encourages trust in union leadership.
  4. Analyzing the union’s financial activity allows the organization to adjust or reallocate money if necessary.

How to Prepare a Budget

The task of creating a budget can seem overwhelming if you don’t know where to start. However, the process can be broken down into a few essential steps.

  1. Determine Your Goals and Ask Key Questions

Before preparing a budget for the coming year, it’s important to consider your organization’s goals. Do you want to improve communication with union members? Provide more professional development opportunities? Increase community engagement?

According to the Union Operating Procedures Manual for Communications Workers of America, you should also take a look at your current finances and ask yourself some key questions:

  • What percentage of funds is utilized for each area or purpose?
  • Are we spending too much in any one area?
  • Are we allocating funds to areas that help build and strengthen the union?

Once you have determined the answers to these questions about your organization’s goals and current fund allocation, you’ll be better able to make decisions about the upcoming year’s budget.

Now it’s time to prepare your budget. At its most basic, preparing a budget requires you to estimate two things: future income and future expenses.

  1. Predict Income

To predict income for your organization, you’ll need to identify all reliable sources of revenue for the coming year. For unions, membership dues make up the majority of income. To predict revenue from membership dues, you’ll need to first predict membership numbers. The CWA Union Manual suggests you may want to assume the “worst case scenario” for membership estimates, predicting the lowest possible membership numbers and thus erring on the side of caution.

After estimating income from membership dues, you’ll want to identify all other sources of income such as investment earnings, interest on savings, fundraising activities, newsletter advertising, and government grants. You should not include in your estimates any income that is unreliable or unpredictable.

  1. Estimate Future Expenses

To estimate your future expenditures, you should first look at your fixed expenses for the year. Fixed expenses include set predictable costs such as officer salaries, payroll taxes, property taxes, rent, phone and internet services, insurance, affiliation fees, etc. You’ll also want to consider variable expenses that change from month to month, including utilities, accounting services, and legal services, among others. You will then need to decide what activities and programs you want to provide for your members in the coming year and determine the cost of each of these. You may want to establish an “additional projects” category to cover any unforeseen programs or projects that might come up throughout the year (CWA).

  1. Compare Income to Expenses

Once you have predicted your income and expenses as accurately as possible, it’s time to compare the two numbers to determine whether there is a budget surplus or deficit. If there is a deficit, you will need to cut back on some programs or services. If there is a surplus, you can set the money aside for future use or use the surplus to expand your program and service offerings.

Union Budgeting Tips

  • Utilize a pre-made budget template to streamline the budget-making process (a sample union budget template can be found here).
  • Take advantage of budgeting software to improve accuracy and efficiency. Many options for budgeting software are available, including QuickBooks’ budgeting function.
  • Make sure all expenses are properly documented via bills and receipts.
  • Regularly review expenses, comparing them with receipts and bills to ensure they match up.
  • Be cautious of the risks of union credit cards. Limit the number of people authorized to use credit cards. It is usually safer to reimburse officers for expenses after the fact than to provide officers with union-owned credit cards (CWA).

Setting a budget is an important aspect of operating a union. For help creating a budget—and for all of your other accounting needs—contact our professionals at RBT CPAs. We’d be happy to work with you to achieve your budget and financial goals.

GASB 101 Update: Implementing the Latest GASB Guidance

GASB 101 Update: Implementing the Latest GASB Guidance

The Governmental Accounting Standards Board (GASB) Statement No. 101 updates GASB Statement No. 16 and addresses the matter of compensated absences for employees of state and local governments.

What is GASB 101?

GASB 101 is an update to the guidelines for state and local governments regarding paid employee leave, otherwise known as “compensated absences.” The purpose of this statement is to update the guidance for recognition and measurement of compensated absences.

What is the effective period?

The requirements of GASB 101 are effective for fiscal years beginning after December 15, 2023. All governmental entities with fiscal year ends of December 31, 2024 or later must implement the new guidance.

What is considered a compensated absence?

Compensated absence: leave for which employees receive compensation in the form of cash payments for time off, cash payments for unused leave if terminated, or a non-cash settlement.

Examples of compensated absences: paid time off, sick leave, holidays, parental leave, military leave, jury duty, bereavement, sabbatical, floating holidays.

When are liabilities recognized?

Liabilities for compensated absences must be recognized in the following cases: for unused leave and leave that has been used but not yet compensated.

  1. Unused leave (unused leave must meet the following criteria to be recognized as a liability):
    1. The employee has performed the services required to earn the leave
    2. The leave accumulates (carries forward into future pay periods)
    3. The leave is more likely than not to be used for time off, or otherwise paid in cash or settled through non-cash means
  2. Leave that has been used but not yet compensated (that is, paid in cash or settled through non-cash means)

As is the case under GASB 16, salary-related payments ­— including the employer’s share of payroll-related taxes (FICA, Medicare), defined pension contributions, and other post-employment benefit plans — should also be part of the compensated absence liability calculation.

Note: Liabilities for certain types of compensated absences that are sporadic in nature, such as parental leave, military leave, and jury duty leave, should not be recognized until the leave commences.

How to measure liability for compensated absences

For unused leave: To measure liability for unused leave, municipalities should use the employee’s pay rate as of the date of the financial statements, unless a compensated absence arrangement calls for a different pay rate at the time of payment (for example, sick pay based on 50% of the employee’s pay rate).

For leave that has been used but not yet paid or settled: To measure liability for leave that has been used but not yet paid or settled, municipalities should use the amount of the cash payment or non-cash settlement to be made.

What has changed from previous guidance?

  • The most significant change brought about by GASB 101 is the application of the “more likely than not” condition when calculating the unused leave liability. This lower threshold will likely result in a higher compensated absences liability than under the previous “probable” threshold.
  • Under the new guidance, liability for sick leave should now be calculated the same way as all other compensated absences.
  • GASB 101 updates the previous requirement (established by GASB 16) to disclose gross increases and decreases in a liability for compensated absences. Governments can now choose to disclose only the net change in the liability, but they must identify this figure as the net change.
  • In addition, under the new statement, government entities are no longer required to disclose which funds have been used to liquidate the liability for compensated absences.

What actions do municipalities need to take?

  • Municipalities should look at their current compensated absences policy and make adjustments in line with GASB Statement No. 101.
  • Municipalities should also review employee contracts and assess whether a change needs to be made to the compensated absence calculation.
  • Municipalities will need to assess leave usage by asking key questions (the answers to these questions will depend largely on employee contracts):
    • What is the likelihood the leave will be used?
    • What is the likelihood the leave will be paid out upon termination, death or retirement?
    • At what rate will the leave be used or paid out?

Additional Resources

For more details on GASB 101, visit the GASB pronouncements page. For advice or assistance with your GASB 101 implementation, please don’t hesitate to reach out to us at RBT CPAs. We’re happy to answer your questions and help guide you through the most recent GASB updates.