Tipped minimum wage lets an employer pay a lower direct cash wage to employees who regularly earn tips, as long as tips make up the rest to reach the full minimum wage. Here's exactly how that works, state by state.
What Is Tipped Minimum Wage?
It's a lower hourly cash wage, set separately from the standard minimum wage, that applies specifically to "tipped employees," workers like servers and bartenders who customarily and regularly receive more than $30 a month in tips. The federal tipped minimum wage is $2.13/hr, versus the $7.25/hr standard federal rate.
A "tip credit" under the Fair Labor Standards Act is the portion of an employee's tips an employer is legally permitted to count toward meeting the full minimum wage obligation, capped at the difference between the tipped cash wage and the full minimum wage.
How Does the Tip Credit Work?
The gap between the tipped cash wage and the full minimum wage is called the "tip credit," the amount of tips the employer is allowed to count toward meeting the full minimum wage. Federally, that's up to $5.12/hr. If direct cash wages plus tips reach at least the full minimum wage in a given workweek, the employer has met its obligation. If they don't, the employer is legally required to pay the shortfall directly.
Which States Don't Allow a Tip Credit?
Seven states require the full minimum wage in cash regardless of tips: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In these states, tipped employees keep 100% of their tips on top of the full state minimum wage, with no offset. See our full state-by-state tipped wage table for every state's exact rate.
What Happens If My Tips Don't Add Up to Minimum Wage?
The employer must pay the difference for that specific workweek. This "make-up" obligation is calculated per workweek, not averaged over a pay period or across multiple weeks, so a slow week can't be offset against a busy one.
Does Tipped Minimum Wage Apply to Delivery Drivers?
Only if they customarily and regularly receive more than $30 a month in tips and the employer follows the same notice and recordkeeping rules required for any tipped role. Many delivery drivers who spend most of their time driving rather than interacting with customers may not clear that bar, and some employers pay drivers the full minimum wage instead.
What Notice Must an Employer Give Before Taking a Tip Credit?
Before applying a tip credit, federal law requires the employer to inform the employee, in advance, of the direct cash wage being paid, the amount of tip credit being claimed, and that the employee is entitled to keep all tips received except through a valid tip pool. An employer that skips this notice loses the right to claim the tip credit at all and must pay the full minimum wage in cash.
Frequently Asked Questions
What is the federal tipped minimum wage?
$2.13 per hour, the lowest direct cash wage an employer can pay a tipped employee under federal law, as long as tips bring total pay up to the full $7.25/hr federal minimum wage.
Can my employer take a tip credit without telling me?
No. Federal law requires advance notice of the cash wage, the tip credit amount, and your right to keep your tips. Skipping this notice forfeits the employer's right to the credit.
Do I keep 100% of my tips?
In the seven states with no tip credit, yes, on top of the full minimum wage. In tip-credit states, you keep your tips minus any valid tip pool contribution, but never less than the full minimum wage in total.
How is overtime calculated for tipped employees?
Off the full minimum wage, not the reduced tipped cash wage, at 1.5 times the regular rate for hours beyond 40 in a week. See our Florida tipped wage guide for a worked example.
For the official federal rules, see the US Department of Labor's tipped employee guidance. See the exact tipped minimum wage and tip credit for every state, or read our deep-dive guides for Florida and New York tipped wage rules.