Check a tipped employee’s week against the FLSA tip credit and your state’s tipped wage
Updated October 2026
Section 3(m)(2)(A) of the Fair Labor Standards Act lets an employer count part of a tipped employee’s tips toward the minimum wage. The employer must pay a cash wage of at least $2.13 an hour, and the tip credit is the difference up to the $7.25 federal minimum: at most $5.12 an hour. The credit can never exceed the tips the employee actually received, and the employer must first tell the employee about the cash wage, the credit amount, the rule that the credit cannot exceed tips, that the employee keeps all tips except in a valid tip pool, and that the credit does not apply without this notice. A "tipped employee" is one who customarily and regularly receives more than $30 a month in tips.
Choose the state (the rates come from the Department of Labor’s tipped-wage table, last revised July 1, 2026), the hours worked in the tipped job during the 7-day workweek, the tips received that week after any tip pool, and the cash wage paid per hour if it is above the lowest allowed. The result shows the credit claimed, the tips needed to cover it, any make-up pay owed, the overtime cash rate if the week went over 40 hours, and total earnings.
The test is done for each workweek. Federal example: the employer pays $2.13 and claims $5.12 an hour. For 40 hours, tips must reach 40 × $5.12 = $204.80. In a 30-hour week with $120 in tips, the credit claimed is 30 × $5.12 = $153.60, so tips fall $33.60 short and the employer owes $33.60 of make-up pay on top of the $63.90 cash wage, bringing the week to exactly 30 × $7.25 = $217.50. Overtime is figured on the full minimum wage: 1.5 × $7.25 = $10.875, minus the $5.12 credit, leaves about $5.76 in cash for each overtime hour.
| Situation | Hours | Tips | Employer cash wages | Make-up pay | Earnings per hour |
|---|---|---|---|---|---|
| Server in a $2.13 state, slow week | 32 | $140.00 | $68.16 | $23.84 | $7.25 |
| Server in California (no tip credit) | 40 | $300.00 | $676.00 | $0.00 | $24.40 |
| Bartender in Florida, $250 from the tip pool | 40 | $250.00 | $439.20 | $0.00 | $17.23 |
| Holiday week, $2.13 state, 45 hours | 45 | $600.00 | $113.97 | $0.00 | $15.87 |
| State | Minimum wage | Maximum tip credit | Minimum cash wage |
|---|---|---|---|
| Federal (also AL, GA, IN, KS, KY, LA, MS, NC, SC, TN, TX, UT, WY) | $7.25 | $5.12 | $2.13 |
| Alaska (no tip credit) | $14.00 | None | $14.00 |
| Arizona | $15.15 | $3.00 | $12.15 |
| Arkansas | $11.00 | $8.37 | $2.63 |
| California (no tip credit) | $16.90 | None | $16.90 |
| Colorado | $15.16 | $3.02 | $12.14 |
| Connecticut, hotel and restaurant | $16.94 | $10.56 | $6.38 |
| Connecticut, bartenders | $16.94 | $8.71 | $8.23 |
| Delaware | $15.00 | $12.77 | $2.23 |
| District of Columbia | $18.40 | $8.10 | $10.30 |
| Florida | $14.00 | $3.02 | $10.98 |
| Hawaii (credit has extra conditions) | $16.00 | $1.25 | $14.75 |
| Idaho | $7.25 | $3.90 | $3.35 |
| Illinois | $15.00 | $6.00 | $9.00 |
| Iowa | $7.25 | $2.90 | $4.35 |
| Maine | $15.10 | $7.55 | $7.55 |
| Maryland | $15.00 | $11.37 | $3.63 |
| Massachusetts | $15.00 | $8.25 | $6.75 |
| Michigan | $13.73 | $8.24 | $5.49 |
| Minnesota (no tip credit) | $11.41 | None | $11.41 |
| Missouri | $15.00 | $7.50 | $7.50 |
| Montana, sales over $110,000 (no tip credit) | $10.85 | None | $10.85 |
| Nebraska | $15.00 | $12.87 | $2.13 |
| Nevada (no tip credit) | $12.00 | None | $12.00 |
| New Hampshire | $7.25 | $3.98 | $3.27 |
| New Jersey | $15.92 | $9.87 | $6.05 |
| New Mexico | $12.00 | $9.00 | $3.00 |
| North Dakota | $7.25 | $2.39 | $4.86 |
| Ohio, gross receipts $405,000 or more | $11.00 | $5.50 | $5.50 |
| Oklahoma | $7.25 | $5.12 | $2.13 |
| Oregon, standard rate (no tip credit) | $15.55 | None | $15.55 |
| Pennsylvania | $7.25 | $4.42 | $2.83 |
| Rhode Island | $16.00 | $12.11 | $3.89 |
| South Dakota | $11.85 | $5.92 | $5.93 |
| Vermont | $14.42 | $7.21 | $7.21 |
| Virginia | $12.77 | $10.64 | $2.13 |
| Washington (no tip credit) | $17.13 | None | $17.13 |
| West Virginia | $8.75 | $6.13 | $2.62 |
| Wisconsin | $7.25 | $4.92 | $2.33 |
When state and federal rules differ, the employer must follow the one more generous to the employee. Some states have local rates, youth or training wages, or extra conditions (Hawaii’s credit, for example, carries a condition noted in the DOL table); New York’s rates vary by region and industry. Check your state labor department for the current rate, because state rates change often.
An employer taking a tip credit may require a traditional tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and bartenders. Managers and supervisors may not take tips from the pool, and the employer may never keep employees’ tips. When an employee works two distinct jobs, such as a server who also works maintenance, the tip credit applies only to the hours in the tipped job. The Department’s 2021 Dual Jobs Rule, which limited the credit when side work exceeded 20% of hours or 30 straight minutes (the "80/20" rule), was vacated by a federal appeals court; DOL restored the earlier regulation text effective with a final rule published December 17, 2024, which treats related duties such as cleaning and setting tables as part of the tipped occupation.
According to DOL Fact Sheet 15, an employer may deduct from a tip paid by card only the actual percentage fee the card company charges on that tip (for example, 3%), cannot push the employee below the minimum wage by doing so, and must pay the tip by the regular payday. Tips above the credit belong to the employee and do not count in the regular rate for overtime (29 CFR 531.60).
Averaging over a two-week pay period instead of testing each workweek. Taking the credit for non-tipped work in a separate job. Skipping the required notice, which voids the credit. Using the federal $2.13 in a state that requires more. Letting a manager share the pool. Deducting more than the card fee from charged tips.
It does not apply local minimum wages, youth or training rates, New York’s regional rates, state daily overtime, service charges (which are not tips), or the new federal income tax deduction for tips. It is not legal advice. Employees can contact the Wage and Hour Division at 1-866-487-9243 or their state labor department; employers with tip-pool or back-pay questions should consult an employment lawyer.