Massachusetts Tipped Employee Calculation Changes Coming Soon

December 23, 2018

The new Massachusetts law known as the “Grand Bargain” creates a little-known but significant change in the way employers pay tipped employees.

The new Massachusetts law, “An Act Relative to Minimum Wage, Paid Family Medical Leave and the Sales Tax Holiday”, also known as the “Grand Bargain” that we previously provided an alert on will have some of its provisions effective beginning January 1, 2019.

The legislation increases the minimum wage over the next five years, creates a permanent sales tax holiday, and creates a new paid family and medical leave program. The law also creates a little-known but significant change in the way that employers pay their tipped employees.

The changes effective January 1, 2019 include:

  • Minimum Wage – current rate of $11 per hour will increase $1 to $12 per hour (Municipal employees excluded)
  • Minimum Cash Wage for tipped workers (service rate) – current rate of $3.75 per hour will increase $0.60 to $4.35 per hour
  • Sunday Premium Pay – decrease from 1.5 times the regular rate to 1.4 times the regular rate
  • Calculation & Payment of Tipped Employees Wages – employers will be required to calculate the tipped employee minimum wages and tip credit amounts at the end of each shift that they work instead of the customary calculation done each pay period.

Implementing the changes needed to comply with the new tipped employee wage calculation will be very difficult for many employers.  Although several organizations have reached out to the agency to ask for a delay in implementing the changes to the tipped employee wage calculation; currently there is no indication from the agency that they will consider the suggestions for delaying the January 1, 2019 effective date.

We will continue to monitor developments and notify our clients of any new guidance from the agency. However, we encourage employers to take action steps now to ensure that they are ready to implement the new requirements in January.

Massachusetts provides a chart of minimum wage increases through 2023, as well as details about other Minimum Wage regulations available here.

Thank you for choosing Paylocity as your Payroll Tax partner.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.


Date posted: December 23, 2018