The pause in Chicago’s incremental tip credit phaseout is a victory for employers in the hospitality industry that rely on a “tip credit,” which allows an employer to pay an eligible tipped employee a lower direct cash wage than the standard minimum wage by using tips the employee earns to satisfy the employer’s minimum wage obligations. Chicago’s current minimum wage is $16.60 per hour, and the permissible maximum tip credit is $3.98 per hour (24 percent of the current minimum wage rate), which means that tipped employees working in Chicago must be paid at least $12.62 per hour.

• Chicago’s tip credit phaseout, which would have eliminated the subminimum tipped wage by 2028, is now paused, with the next phased adjustment postponed until 2028 or later, depending on employer size.
• Enacted in 2023 and applicable to all workers employed within Chicago’s city limits, the One Fair Wage ordinance was calibrated to reduce the tip credit over the course of five years, with its eventual elimination scheduled to have occurred by July 1, 2028.
• The delay in the phaseout may help businesses manage rising labor costs. The tip credit is currently 24 percent of Chicago’s current minimum wage rate.

In 2023, the Chicago City Council voted to gradually eliminate Chicago’s tip credit under the One Fair Wage ordinance, beginning on July 1, 2024. The ordinance provided a five-year plan to lower the Chicago subminimum “tipped” wage so that all tipped workers eventually earned the full standard...

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