Tip Credit:
On Wednesday July 19, 2023, the Chicago City Council introduced legislation to eliminate the city’s “tip credit” over a two-year period (if passed), in an effort to raise the city’s current hourly minimum wage rate for tipped employees to equal the city’s hourly minimum wage rate for non-tipped employees, which is currently $15.80 for employees of large employers (employers with 21 or more employees) and $15.00 for employees of small employers (employers with 4 to 20 employees). The city’s current hourly minimum wage rate for tipped employees is $9.48 for employees of large employers and $9.00 for employees of small employers. Put another way, tipped employees in the City of Chicago currently earn 40% of the standard hourly minimum wage rate for non-tipped employees. If this proposed legislation is passed by the city council, the hourly minimum wage rate increases for tipped employees would begin, and take effect on July 1, 2024. Though, it’s unclear if or when the city council will vote on this proposed legislation.
What is the tip credit? Employers of employees that receive tips, such as servers, waiters or bartenders, can credit or include the tips the employee earns and receives in the employee’s hourly minimum wage calculation. Employers in Chicago must pay their tipped employees at least the city’s hourly tipped employees’ minimum wage rate ($9.48 or $9.00) in addition to the tips they earn. If a tipped employee fails to earn the hourly minimum wage rate...
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