Minimum Wage for Workers Who Receive Tips

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The minimum wage for tipped workers is lower than the regular minimum wage. The federal government sets a required minimum wage for workers who receive tips. However, some states have a higher minimum wage than the federal rate.

Even though the hourly rate is lower, the total hourly rate must reach the designated minimum wage. That amount varies based on location. For example, the federal minimum wage is $7.25 per hour, and the combined cash and tip rate must equal or exceed that amount.

In Florida, for example, the total is $8.10 in 2017. The total hourly wage you will earn is the minimum wage for your state.

Federal Minimum Wage for Tipped Workers

When an employee (typically waitstaff or a similar occupation) receives tips, the employer is only required to pay $2.13 per hour in wages. However, the total amount earned ($2.13/hour plus tips) must equal the federal minimum wage.

This is known as the tip credit provision or tip credit allowance. It allows the employer to pay less than the minimum wage, because the employee is receiving tips. A tipped employee is defined as one who receives at least $30 a month in tips.

Minimum Wage for Federal Contract Workers

 Tipped employees connected to federal contracts must be paid a cash wage of at least $6.80 per hour.

State Minimum Wage for Tipped Workers

Some states require employers to pay workers above federal tipped minimum wage  For example, in 2017, the Arizona minimum wage for tipped workers is $5.05 per hour.

It's $3.75 per hour in Massachusetts. The combined cash and tip state minimum wages are correspondingly higher.

Employers must follow state law when paying employees. If you're not sure what you should be paid,  . If there are no laws stipulating a minimum wage law in your location, the federal minimum wage is applicable.

Total Hourly Earnings With Tip Credits

The federal minimum tip wage is combined with a tip credit to reach the federal minimum wage. For example, the maximum tip credit is $5.12 per hour. $5.12 per hour plus the minimum tipped wage of $2.13 equals the federal minimum wage of $7.25 an hour.

The federal minimum wage is guaranteed, however tipped workers receive some of this income from employers and some from tips. The worker will earn more if the tips they receive bring their earnings above minimum wage.

In a state with a higher minimum wage, the total will reach the maximum minimum wage for that location. For example, in Colorado, the tip credit: $6.28 plus the tipped worker minimum wage: $3.02 equals the state minimum wage: $9.30. Again, the hourly earnings can be higher based on the amount of tips the worker earns.

Read More: How Much is Minimum Wage? | Federal and State Minimum Wage Rates

Please Note: These examples are based on 2017 minimum federal and state minimum wage rates.