Your first paycheck: tips, overtime, and what gets taken out

The Fair Labor Standards Act (FLSA), the main federal wage law, says covered employees must get overtime for hours over 40 in a workweek. The rate is at least time and one-half their regular pay. A workweek is a fixed period of 168 hours, seven days in a row, that the employer sets. It does not have to start on Monday.

So her 44 hours are really 40 hours at $12 ($480) plus 4 hours at $18 ($72). Before taxes, she earned $552, not $528.

The U.S. Department of Labor says the FLSA does not require extra pay just for working weekends or holidays. Only the hours past 40 count. Some states add daily overtime or higher rates, so check your state labor office too.

Under the FLSA, an employer may never keep any part of a worker's tips, and managers and supervisors cannot take tips either. An employer can require a tip pool, where tips are shared among workers, but managers cannot be in it.

Some employers pay tipped workers a cash wage as low as $2.13 an hour and count tips toward the federal minimum of $7.25. That is called a tip credit. If wages and tips together fall short of $7.25 an hour in a workweek, the employer must make up the difference. Many states do not allow this or set a higher cash wage. Our article on tip credits and pay stubs walks through that math.

The IRS (Internal Revenue Service) sets the Social Security rate at 6.2% and Medicare at 1.45% for the employee. On $552, that is about $34.22 and $8.00. Federal income tax may also be held back, based on the tax form you filled out when you were hired, and many states take out state income tax.

If too much income tax was held back during the year, you may get some back by filing a tax return.

These rules have a long history. In United States v. Darby (1941), the U.S. Supreme Court upheld the FLSA's minimum wage, maximum hours, and overtime rules, and overruled Hammer v. Dagenhart (1918), which had blocked an earlier federal child labor law.