Tipped Minimum Wage
What Is Tipped Minimum Wage and How Does It Vary by State?
Tipped minimum wage is the reduced direct cash wage an employer may pay a tipped employee, contingent on tip credit rules. The federal tipped minimum wage is $2.13/hour, but many states set higher tipped minimums or prohibit the tip credit entirely.
The federal tipped minimum wage has remained at $2.13/hour since 1991. State variation is substantial: some states mirror the federal rate, many set a higher tipped minimum, and a growing number of states—including California and Washington—require the full state minimum wage with no tip credit at all.
For multi-state restaurant and hospitality employers, payroll systems need to apply the correct tipped minimum wage rule by work location. Employers must also track and document, for every shift, that tipped employees’ total earnings met or exceeded the applicable minimum wage.
Key facts:
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Federal tipped minimum wage: $2.13/hour (unchanged since 1991).
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Some states require the full state minimum wage with no tip credit allowed.
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Rate and rules must be applied by work location for multi-state employers.
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Employers must document that total earnings meet minimum wage every shift.
Industry context
Restaurant operators expanding into new states should verify tipped minimum wage rules location-by-location—a policy compliant in one state can be a violation in another.
Frequently Asked Questions
Has the federal tipped minimum wage changed recently?
No—it has remained at $2.13/hour since 1991.
Do any states require full minimum wage for tipped employees?
Yes—including California and Washington, with no tip credit permitted.
What should a multi-location restaurant employer watch for?
Applying the correct tipped minimum wage rule by location.
Can a tipped employee’s cash wage be less than $2.13/hour?
No—the federal cash wage floor for tipped employees is $2.13/hour, though some states set a higher minimum cash wage.
Does tipped minimum wage apply to occasional tip earners, like delivery drivers?
It can, but only if the employee regularly and customarily receives more than $30 a month in tips, which is the federal threshold for tipped-employee status.
Related terms: Tip Credit, Minimum Wage by State, FLSA