Maui Business

Minimum wage workers prepare for Oct. 1 wage increase to $12 an hour

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Maui residents join in statewide sign-waving in support of minimum wage increase and Earned Income Tax Credit. (4.27.22)
File photo PC: Kehaulani Cerizo

Hawaiʻi’s minimum wage workers will see their pay rise to $12 an hour beginning Saturday, Oct. 1, 2022. Hawaiʻi’s minimum wage will remain at $12 an hour until Jan. 1, 2024, when it will rise again to $14. It will then go up by $2 every other year until it reaches $18 per hour on Jan. 1, 2028.

This is the first increase in the minimum wage since 2018 when the minimum wage rate was set at $10.10 per hour. As of 2019, there were more than 88,000 workers in Hawaiʻi earning the minimum wage.

At the same time, the tip penalty (officially, the “tip credit”) will see corresponding increases as well.

“The purpose of the minimum wage law is to protect the health, efficiency, and general well-being of workers,” said DLIR Director Anne Perreira-Eustaquio. “The minimum wage rate is a floor designed to protect workers against unduly low pay.”

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“When my coworkers and I found out that the minimum wage was to be raised, I could almost feel the weight lift off of their shoulders,” said Zanni Walker in a Raise Up Hawaiʻi Coalition press release. Walker who earns the state minimum wage said, “A majority of them are older people—many of whom work multiple jobs. Seeing how hard even the seniors have to work is very disheartening as they should be retired at their age. With this raise, I hope that people who rely on income from minimum wage jobs will begin to be able to live better off of it.”

“The minimum wage increase will make it easier for low-income people to save money and will help them to meet their personal needs,” said Jhoe Rosales, also a minimum wage worker. “As a college student who works multiple jobs, the increase will make it easier for me to succeed at school while also helping my family. Although we will have to wait for the additional increases, we need this immediate step-up to $12 to help people afford to stay in their homes. It isn’t easy to survive in Hawaiʻi on minimum wage.”

Tip penalty chart.

What is the tip penalty?

The tip penalty allows employers to pay less than the full minimum wage to workers who make at least $20 in tips per month—as long as the worker makes at least $7 above the minimum wage in combined wages and tips per hour after the penalty is calculated.

Employees customarily tipped may be paid at rates lower than the minimum wage provided the combined amount the employee receives from the employee’s employer and in tips is at least $7 more than the minimum wage. Act 114 permits rates at $1 below the minimum wage beginning on Oct. 1, 2022, $1.25 below the minimum wage beginning on Jan. 1, 2024, and $1.50 below the minimum wage beginning on Jan. 1, 2028.

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 For more information on the tip credit and charts visit: https://labor.hawaii.gov/wsd/files/2022/06/Tip_Credit_Notice_with_exhibits_June2022.pdf.

How The Tip Penalty Works in Practice

Come Oct. 1, an employer will be able to deduct up to $1 from the wages of a tipped worker, as long as the penalty does not drop the worker’s combined wages and tips below an average of $19 an hour after the penalty is applied.

In other words, a worker who makes an average of at least $8 an hour in tips in a week could b paid $1 less than the minimum wage, reducing their wage to $11 an hour (plus the $8 in tips for total income of $19 an hour).

Note: Employers can deduct a smaller amount if the worker makes between $7 and $8 an hour in tips. For example, a tipped worker that makes an average of $7.50 an hour in tips could have a $0.50 tip penalty applied to their wage, resulting in a wage of $11.50 an hour.

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The employer is required to:

  • Notify all employees in writing at the time of hire if they plan to use the tip penalty.
  • Notify employees of any changes in their tip penalty policy—in writing or through a posted notice—prior to the start of the pay period.
  • Report to employees in writing each time the amount of tip penalty taken changes from the amount per hour taken in the preceding week.
  • Maintain time records.

Tipped workers should review their paystubs regularly to make sure they are making at least $7 above the minimum wage after the tip penalty is applied. If an employer is improperly applying the tip penalty, contact the Wage Standard Division of the Hawaiʻi Department of Labor and Industrial Relations.

The Raise Up Hawaiʻi Coalition advocates to raise the minimum wage in Hawaiʻi to a level that will sustain all of Hawaiʻi’s working residents.

For more information on wage and hour laws, visit the Wage Standards Division website at http://labor.hawaii.gov/wsd/minimum-wage/ or call 808-586-8777.

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