Tipped Employees
Tipped employees are subject to the same minimum wage rates as other employees. However, employers are permitted, under federal law, to take a credit against wages for tips received by employees from customers. The rules are:
Some states also address tip credits. Many of these restrict use of the credit to industries where tipping is traditional, such as food service. If your state’s minimum wage, minus the state tip credit, is higher than the federal minimum wage, minus the federal tip credit, you must pay the worker the higher amount.
If you have any employees who customarily receive tips from customers, patrons, or other third parties, you have additional recordkeeping to do. In addition to the records you keep for nonexempt employees, your pay records must identify the employees who are tipped and account for the tips reported by each employee. If tips are treated as wages for purposes of meeting minimum pay requirements, you'll need records showing that.
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Select a state from the map below to get information on employees who receive tips: |
| Tipped employees in Alaska choose another state |
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In Alaska, tips received by employees may not be included in determining minimum wage compliance. |
| Tipped employees in Alabama choose another state |
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Alabama has no law on tipped employees. |
| Tipped employees in Arkansas choose another state |
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Employers in Arkansas are entitled to an allowance for gratuities as part of the minimum wage in an amount not to exceed 50 percent of the state minimum wage rate. Effective October 1, 2006, a tip credit of up to 58 percent of the minimum wage rate is allowed, provided that a tipped employee receives that amount in tips and that the employee receives wages other than tips in the amount of at least 42 percent of the minimum wage rate. |
| Tipped employees in Arizona choose another state |
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Arizona has no law on tipped employees. |
| Tipped employees in California choose another state |
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In California, tips may not be counted toward the state minimum wage. |
| Tipped employees in Colorado choose another state |
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In Colorado, $3.02 per hour is allowed as a tip credit. Tipped employees are those who customarily and regularly receive more than $30 per month in tips. |
| Tipped employees in Connecticut choose another state |
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In Connecticut, a gratuity is a voluntary monetary contribution received by the employee from a guest, patron or customer for service rendered. The tip credit is 23 percent of the state minimum wage for those in the hotel and restaurant industry and $.35 per hour for those in other industries. |
| Tipped employees in District of Columbia choose another state |
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Employers are entitled to a tip credit of not more than 55 percent of the minimum wage for employees who receive gratuities. Effective January 1, 2005, the minimum wage for employees receiving tips is $2.77 per hour, provided that the employees receive gratuities in an amount at least equal to the difference between the hourly wage paid and the state's minimum wage. The tip credit will not apply to a tipped employee unless the employer has informed the employee of the tip credit provisions and the employee retains all tips received. However, tip pooling is permitted. |
| Tipped employees in Delaware choose another state |
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In Delaware, the minimum cash wage payable to employees who receive tips is $2.23 per hour. The employer must be able to prove that the employee received the balance of the full minimum wage rate ($5.15) in tips. Note that Delaware's minimum cash wage for tipped employees is greater than the cash wage required by federal law. Employers must pay Delaware's higher rate. Tips may not be taken or retained by an employer except as required by law. Tip pooling is permitted (under certain conditions) in an amount not to exceed 15 percent of the actual tips received by the employee. |
| Tipped employees in Florida choose another state |
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On November 2, 2004, Florida voters approved a measure that establishes a state minimum wage of $6.15 an hour, effective six months after enactment. The measure also allows for a tip credit up to the amount of the allowable Fair Labor Standards Act (FLSA) 2003 tip credit for employers of employees that meet the eligibility requirements for the tip credit under the FLSA. Employers must pay tipped employees meeting the eligibility requirements for the tip credit under FLSA not less than $3.13 per hour in direct wages. |
| Tipped employees in Georgia choose another state |
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Georgia has no law on tipped employees. |
| Tipped employees in Hawaii choose another state |
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In Hawaii, $.25 per hour is allowed as a tip credit, provided the employee receives at least $.75 per hour in tips. |
| Tipped employees in Iowa choose another state |
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In Iowa, for an employee of a restaurant, hotel, motel, inn or cabin, who customarily and regularly receives more than $30 a month in tips, the amount paid the employee by the employer may be deemed by the employer to be increased by the amount of the tips up to 40 percent of the applicable minimum wage (currently, $2.06 per hour is allowed as a tip credit). An employee may file a written appeal with the labor commissioner if the amount of tips received by the employee is less than the amount determined by the employer. |
| Tipped employees in Idaho choose another state |
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In Idaho, in determining the wage of a tipped employee, the amount paid by an employer may be increased by the amount of the tips actually received but not in excess of 35 percent of the applicable minimum wage (currently, $1.80 per hour is allowed as a tip credit). Tipped employee means any employee engaged in an occupation in which the employee customarily and regularly receives more than $30 a month in tips. Where there is a dispute between the employer and employee concerning the amount of tips, it is the employer's burden to demonstrate the amount of tips actually received by the employee. Under a tip pooling or similar arrangement, any portion of tips paid to an employee must not be considered tips actually received by the employee. |
| Tipped employees in Illinois choose another state |
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In Illinois, in occupations where gratuities constitute a part of the remuneration, the employer is entitled to an allowance for gratuities as part of the employee's hourly wage rate in an amount not to exceed 40 percent of the applicable minimum wage. Employers taking a tip allowance are required to provide substantial evidence that the amount claimed as tips was received by the employee in the period for which the claim of exemption is made and that no part of that amount was returned to the employer. |
| Tipped employees in Indiana choose another state |
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Tipped employees must be paid a minimum cash wage of $2.13 per hour. Currently, the maximum tip credit is 40% of the state minimum wage for employers with at least two employees. The employer is responsible for supporting the amount of tip credit taken through reported tips by employees. |
| Tipped employees in Kansas choose another state |
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In calculating the minimum wage in Kansas, employers may take into account tips and gratuities received by an employee in an amount not to exceed 40 percent of the minimum wage rate, if those tips have customarily been a part of the employee's wages and the employee actually receives and retains them. Currently, $1.06 per hour is allowed as a tip credit. |
| Tipped employees in Kentucky choose another state |
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In Kentucky, employers may pay a minimum hourly wage of $2.13 per hour to tipped employees who regularly receive tips in excess of $30 per month, if the employer can establish with records that the minimum wage of $5.15 was met by adding tips to the employees' cash wages. Employers cannot require employees to remit tips to them, except for the purpose of withholding amounts required by federal or state law. |
| Tipped employees in Louisiana choose another state |
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Louisiana has no law on tipped employees. |
| Tipped employees in Massachusetts choose another state |
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In Massachusetts, employers of employees who regularly receive tips in excess of $20 per month (the regulations provide a $30 limit) pay tipped employees $2.63 per hour and credit the difference between the $2.63 and the applicable minimum wage rate toward the requirement, unless the amount of tips actually received by the employee is less than the amount credited by the employer. Effective September 9, 2004, employers cannot demand, request or accept from any wait staff employee, service employee, or service bartender any payment or deduction from a tip or service charge given to the employee by a patron. Employers cannot retain or distribute any tip or service charge given directly to the employer. Employers cannot cause, require, or permit any wait staff employee, service employee, or service bartender to participate in a tip pool through which the employee remits any (or any portion of) wage, tip, or service charge, for distribution to any person who is not a wait staff employee, service employee, or service bartender. An employer is permitted to administer a valid tip pool and may keep a record of the amounts received for bookkeeping or tax reporting purposes. Employers may impose on a patron any house or administrative fee in addition to, or instead of a service charge or tip, if the employer provides a designation or written description of the house or administrative fee, which informs the patron that fee imposed does not represent a tip or service charge for wait staff or service employees or service bartenders. If an employer submits a bill, invoice, or charge to a patron or other person that imposes a service charge or tip, the total proceeds of that service charge or tip should be remitted only to wait staff or service employees or service bartenders in proportion to the services provided. Lastly, any service charge or tip remitted by a patron or other person to an employer should be paid to the wait staff or service employee or service bartender by the end of the same business day, and in no case any later than the time set for timely payment of wages under Massachusetts law. |
| Tipped employees in Maryland choose another state |
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In Maryland, a tipped employee is one who customarily receives more than $30 a month in tips. Up to 50 percent of the minimum wage rate per hour is allowed as a tip credit. |
| Tipped employees in Maine choose another state |
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A Maine employer may consider tips as part of the wages of a service employee, but the credit taken by the employer may not exceed 50 percent of the state minimum hourly wage. An employer that elects to use the tip credit must inform the affected employee in advance and must be able to show that the employee receives at least the minimum hourly wage when direct wages (wages paid directly to the employee by the employer as opposed to money earned in tips) and the tip credit are combined. If the employee can show that the actual tips received were less than the tip credit, the employer must increase the employee's direct wages by the difference. |
| Tipped employees in Michigan choose another state |
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In Michigan, $2.50 is allowed as a tip credit (the difference between $2.65, which is the minimum wage for tipped employees, and the basic minimum wage of $5.15). |
| Tipped employees in Minnesota choose another state |
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Employers may not directly or indirectly credit, apply, or use gratuities toward payment of the state or federal minimum wage. |
| Tipped employees in Missouri choose another state |
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In Missouri, tip earners need not be paid in excess of 50 percent of the minimum wage rate; however, the tip earner's compensation must total at least the minimum wage rate with the employer making up the difference. Currently, $2.58 per hour is allowed as a tip credit. |
| Tipped employees in Mississippi choose another state |
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Mississippi has no law on tipped employees. |
| Tipped employees in Montana choose another state |
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In Montana, employers may not take a credit against the minimum wage for tips. |
| Tipped employees in North Carolina choose another state |
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In North Carolina, tips earned by tipped employees may be credited for up to $3.02. A tipped employee is one who customarily receives at least $20 in tips a month. Tips may not be reduced by more than 15 percent under a pooling arrangement. Even if an employee refuses to certify tips accurately, tips may still be counted as wages when the employer complies with the other requirements of the law and can demonstrate by monitoring tips that the employee regularly receives tips in the amount for which the credit is taken. |
| Tipped employees in North Dakota choose another state |
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Employers in North Dakota are permitted to take a tip credit of 33 percent of minimum wage. Currently, $1.70 per hour is allowed as a tip credit. Employers must be able to prove that the combination of tips and wages equals at least the full minimum wage. |
| Tipped employees in Nebraska choose another state |
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In Nebraska, persons compensated with gratuities must be paid wages at the minimum rate of $2.13 per hour, plus all gratuities given to them for services rendered. The sum of wages and gratuities received by each person compensated with gratuities must equal or exceed the general minimum wage rate in effect. |
| Tipped employees in New Hampshire choose another state |
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In New Hampshire, tips may be credited toward half the minimum wage if employees customarily receive more than $20 in tips per month. Currently, $2.58 per hour is allowed as a tip credit. If the amount of wages an employee receives at the end of a pay period does not equal the minimum wage for all hours worked, the employer must pay the employee the difference to guarantee the applicable minimum wage. |
| Tipped employees in New Jersey choose another state |
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In New Jersey, for employment in hotel and motel occupations and food service occupations where gratuities are actually received, employers subject to the FLSA must pay the federal cash wage rate of $2.13 per hour and must demonstrate that the balance of the state minimum wage rate is paid through gratuities. Employers not subject to the FLSA must demonstrate that total wages, including cash and gratuities, equals the state minimum wage rate. Tips may not be counted as part of the minimum wage or regular wage paid to minor employees in beauty culture occupations. |
| Tipped employees in New Mexico choose another state |
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Effective July 1, 2005, in New Mexico, an employee who regularly receives more than $30 a month in tips must be paid a minimum hourly rate of $2.13. Employers may consider tips as part of wages, but the tips combined with the employer's cash wage can not be less than $5.60 per hour. Tip pooling is permitted. |
| Tipped employees in Nevada choose another state |
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In Nevada, no tip credit against minimum wage is recognized. |
| Tipped employees in New York choose another state |
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In New York, for restaurant employees, $1.15 per hour is allowed as a tip credit for employees receiving tips of between $1.15 to $1.65 per hour; $1.65 per hour is allowed as a credit for employees receiving tips of $1.65 or over per hour; no tip credit is allowed for tips of less than $1.15 per hour; other rules apply to workers outside the restaurant industry. |
| Tipped employees in Ohio choose another state |
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Effective June 30, 2006, in Ohio, the employer of any employee engaged in an occupation whose employees customarily and regularly receive more than $30 per month in tips must pay the wage rate specified for tipped employees in the federal Fair Labor Standards Act (FLSA). Before June 30, 2006, employers in Ohio must pay a cash wage equal to at least 50 percent of the applicable minimum wage to tipped employees. Employers with less than $500,000 in gross annual sales must pay tipped employees a minimum wage of $2.01 per hour. However, the following conditions must be met: (1) the tips or gratuities must be proven gratuities as indicated by the employee's declaration for Federal Insurance Contributions Act (FICA) purposes, (2) the employer must be able to establish by its records that for each week in which a credit is taken, not less than the minimum rate is received by the employee when tips are added to wages paid, and (3) the employee must be informed by the employer of the provisions of the tip credit. |
| Tipped employees in Oklahoma choose another state |
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In Oklahoma, employers may claim a credit for tips up to 50% of the minimum wage. Currently, $2.58 per hour is allowed as a tip credit. Employers that furnish uniforms may credit the reasonable cost of the uniform toward the minimum wage. |
| Tipped employees in Oregon choose another state |
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Employers may not include any amount received by employees as tips in determining the wages to be paid under Oregon's minimum wage law. |
| Tipped employees in Pennsylvania choose another state |
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In Pennsylvania, tips may be used to reduce the employer's minimum wage obligation up to 45 percent of the hourly rate, provided this practice is explained to the employees and the employees keep their own tips or pool them among themselves. Currently, $2.32 per hour is allowed as a tip credit. |
| Tipped employees in Puerto Rico choose another state |
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No information available. |
| Tipped employees in Rhode Island choose another state |
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In Rhode Island, employees who regularly receive tips in their employment (except for taxicabs or limited public motor vehicles) must be paid the current applicable minimum wage, less a $2.89 per hour tip credit or allowance. If an employer calls an employee to work at the beginning of the shift and does not furnish at least four hours of work, the employer must pay the employee not less than four times the regular hourly rate. |
| Tipped employees in South Carolina choose another state |
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South Carolina has no law on tipped employees. |
| Tipped employees in South Dakota choose another state |
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In South Dakota, minimum wage for tipped employees is $2.13 per hour. Tipped employees are those engaged in occupations, other than babysitting or outside sales, in which they customarily receive more than $35 per month in tips or other considerations. Currently, up to $3.02 per hour is allowed as a tip credit. If the employee's tips combined with the employer's cash wages do not equal the minimum hourly wage, the employer must make up the difference as additional wages. |
| Tipped employees in Tennessee choose another state |
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Tennessee has no law on tipped employees. |
| Tipped employees in Texas choose another state |
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In Texas, the minimum wage for an employee who regularly and customarily receives tips in excess of $20 per month is $2.13. Currently, $3.02 per hour is allowed as a tip credit. |
| Tipped employees in Utah choose another state |
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An employer must pay a tipped employee at least the state minimum wage. In computing a tipped employee's wage, the employer must pay the tipped employee at least the cash wage obligation as an hourly wage and may compute the remainder of the tipped employee's wage using the tips or gratuities the tipped employee actually receives. Tipped employees must retain all tips and gratuities except to the extent that the employee participates in a bona fide tip pooling or sharing arrangement with other tipped employees. |
| Tipped employees in Virginia choose another state |
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The minimum wage may be fully offset by tips. |
| Tipped employees in Virgin Islands choose another state |
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No information available. |
| Tipped employees in Vermont choose another state |
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In Vermont, 45% of the state minimum wage is currently allowed as a tip credit. Effective January 1, 2004, the state minimum wage is $6.75 per hour and an employer in the hotel, motel, tourist place, and restaurant industry may not employ a service or tipped employee at a basic wage rate less than $3.58 an hour. Effective January 1, 2005, the Vermont minimum wage is $7.00 per hour and the basic wage rate for these tipped employees cannot be less than $3.65 an hour. Thereafter, the rate will be determined when the minimum wage is increased. A service or tipped employee means all those, in either hotels, motels, tourist places, and restaurants who customarily and regularly receive more than $30 per month in tips for direct and personal customer service. |
| Tipped employees in Washington choose another state |
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Under state law, tips cannot be counted toward the minimum wage. |
| Tipped employees in Wisconsin choose another state |
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In Wisconsin, the minimum wage for tipped employees is $2.33 per hour. Tips received plus wages paid must equal or exceed the minimum wage rate. |
| Tipped employees in West Virginia choose another state |
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An employer in West Virginia may not take a credit of more than 20 percent of the hourly minimum wage for an employee receiving gratuities. Currently, $1.03 per hour is allowed as a tip credit. |
| Tipped employees in Wyoming choose another state |
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In Wyoming, in determining the wage rate of a tipped employee, the amount paid such employee by the employer is deemed to be increased on account of tips received by the employee by an amount not in excess of 50 percent of the applicable minimum wage. In all cases, however, the minimum wage paid by an employer to its employee may not be less than $2.13 per hour. If the wage paid by the employer combined with the employee tips is less than the minimum wage of $5.15 during any given pay period, the employer must pay the difference to the tipped employee. Tipped employees are employees who customarily and regularly receive more than $30 a month in tips. |
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