Millions of people in the workforce count on tips. If you have employees who regularly receive tips, complying with minimum wage regulations can be a complicated business—especially when calculating overtime. The reality is that the rules are different based on where you operate within the country. If you’re running payroll for multiple restaurants or other hospitality businesses, you need to be informed of what the tipped minimum wage laws are.
By federal law, a tipped worker is anyone who regularly receives at least $30 per month in tips; however states may have a different threshold for tipped workers.
Workers in these states only have to receive $20 per month in tips to be considered a tipped employee:
Five states have no state laws setting a minimum wage for tipped employees. They are:
The tipped minimum wage rate is the lowest amount an employee can earn per hour. This is made up of a basic cash wage (which must be paid by the employer) plus a tip credit (which an employer can claim). Federal law sets the minimum base wage at $2.13 per hour, but many states mandate a higher level. In some states, employers must pay tipped employees the full state minimum wage before tips.
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