What is the difference between tipped and non-tipped wages?
Tipped employees
Tipped employees are those who customarily and regularly receive more than $30 per month in tips. Under federal law, employers can pay them a cash wage as low as $2.13 per hour and take a tip credit toward the minimum wage. The employee's tips plus cash wage must equal at least the full minimum wage, or the employer must make up the difference.
Tipped roles include servers, bartenders, and bussers who share tips. Some states require a higher cash wage or no tip credit at all. Tipped employees may also be subject to tip pooling, where tips are shared among certain staff.
- Cash wage can be as low as $2.13 per hour under federal law.
- Tips must bring total to at least $7.25 per hour (federal minimum).
- Employer must make up any shortfall.
- State laws may require higher cash wages or no tip credit.
Non-tipped employees
Non-tipped employees are paid at least the full minimum wage (federal or state) with no tip credit. They include cooks, dishwashers, hosts, and managers who don't receive tips. They must be paid overtime at 1.5 times their regular rate for hours over 40 in a workweek, unless they are exempt.
Some non-tipped employees may receive tips through tip pooling if they are in a tipped occupation, but if they don't customarily receive tips, they are generally non-tipped. Misclassifying employees can lead to wage violations.
Common mistakes
- Assuming all restaurant employees can be paid the tipped minimum wage; only those who regularly receive tips qualify.
- Failing to make up the difference when tips don't reach minimum wage.
- Including non-tipped employees in tip pools, which is not allowed in many states.
