Millions of people in the workforce count on tips. If you have employees who regularly receive tips, complying with minimum wage regulations can be a complicated business—especially when calculating overtime. The reality is that the rules are different based on where you operate within the country. If you’re running payroll for multiple restaurants or other hospitality businesses, you need to be informed of what the tipped minimum wage laws are.
What is a Tipped Employee?
By federal law, a tipped worker is anyone who regularly receives at least $30 per month in tips. States may have a different threshold for tipped workers.
Workers in these states only have to receive $20 per months in tips:
- Arkansas
- Hawaii
- Illinois
- Massachusetts
- Kansas
- North Carolina
- Texas
Three states have a minimum base wage higher than federal standards: South Dakota at $35, Vermont at $120, and Connecticut with a minimum of $10 weekly for full-time employees or $2 daily for part-time hotel and restaurant employees.
There are six states with no state laws setting a minimum wage for tipped employees. They are:
- Alabama
- Georgia
- Louisiana
- Mississippi
- South Carolina
- Tennessee
How Do Different States Calculate Tipped Minimum Wage?
The tipped minimum wage rate is the lowest amount an employee can earn per hour. This is made up of a basic cash wage (which must be paid by the employer) plus a tip credit (which an employer can claim). Federal law sets the minimum base wage at $2.13 per hour, but many states mandate a higher level. In some states, employers must pay tipped employees the full state minimum wage before tips.
To help your organization stay aware of the latest labor laws, Paycor has created a breakdown of tipped minimum wage by state for 2023.
| State | Minimum Wage Rate | Maximum Tip Credit | Tipped Minimum Wage (Total) |
|---|---|---|---|
| Federal | $2.13 | $5.12 | $7.25 |
| Alabama | $2.13 | – | – |
| Alaska | $10.34 | – | $10.34 |
| Arizona | $9.80 | $3.00 | $12.80 |
| Arkansas | $2.63 | $8.37 | $11.00 |
| California 1 | $15.50 | – | $15.50 |
| Colorado | $10.62 | $3.02 | $13.65 |
| Connecticut 2 | $6.38 | $7.62 | $14.00 |
| Delaware | $2.23 | $9.52 | $11.75 |
| Florida 3 | $7.98 | $3.02 | $11.00 |
| Georgia 4 | $2.13 | – | – |
| Hawaii | $9.35 | $0.75 | $10.10 |
| Idaho | $3.35 | $3.90 | $7.25 |
| Illinois | $7.80 | $5.20 | $13 |
| Indiana | $2.13 | $5.12 | $7.25 |
| Iowa | $4.35 | $2.90 | $7.25 |
| Kansas | $2.13 | $5.12 | $7.25 |
| Kentucky | $2.13 | $5.12 | $7.25 |
| Louisiana | $2.13 | – | – |
| Maine | $6.38 | $6.37 | $13.80 |
| Maryland | $3.63 | $9.62 | $13.25 |
| Massachusetts | $6.75 | $8.25 | $15 |
| Michigan | $3.84 | $6.26 | $10.10 |
| Minnesota | $10.59 | – | $10.59 |
| Mississippi | $2.13 | – | – |
| Missouri | $6 | $6 | $12 |
| Montana | $9.95 | – | $9.95 |
| Nebraska | $2.13 | $6.87 | $9.00 |
| Nevada | $11.25 | – | $11.25 |
| New Hampshire | $3.26 | $3.99 | $7.25 |
| New Jersey | $5.26 | $8.87 | $14.13 |
| New Mexico | $3 | $9 | $12 |
| New York 5 | $10 | $5 | $15 |
| North Carolina | $2.13 | $5.12 | $7.25 |
| North Dakota | $4.86 | $2.39 | $7.25 |
| Ohio | $5.05 | $5.05 | $10.10 |
| Oklahoma | $2.13 | $5.12 | $7.25 |
| Oregon | $13.50 | – | $13.50 |
| Pennsylvania | $2.83 | $4.42 | $7.25 |
| Rhode Island | $3.89 | $9.11 | $13.00 |
| South Carolina | $2.13 | – | – |
| South Dakota | $5.40 | $5.40 | $10.80 |
| Tennessee | $2.13 | – | – |
| Texas | $2.13 | $5.12 | $7.25 |
| Utah | $2.13 | $5.12 | $7.25 |
| Vermont | $6.59 | $7.19 | $13.18 |
| Virginia | $2.13 | $9.87 | $12.00 |
| Washington | $15.74 | – | $15.74 |
| West Virginia | $2.62 | $6.13 | $8.75 |
| Wisconsin | $2.33 | $4.92 | $7.25 |
| Wyoming | $2.13 | $5.12 | $7.25 |
1 For local minimum wage regulations, read our guide to California Minimum Wage.
2 From 1/1/2023 – 05/30/2023. The minimum wage will rise on 06/01/2023.
3 Through September 29, 2023. Minimum wage will raise On September 30.
4 Georgia has a state minimum wage law, but it does not apply to tipped employees.
5 Minimum wage for tipped food service workers.
Should We Have a Tipped Minimum Wage?
You’ll find numerous arguments on both sides of the issue of eliminating tipped or subminimum wage. Alaska, Maine, Maryland, New Hampshire, Oregon, Washington, Hawaii, Colorado, California, Delaware, Tennessee, South Carolina & Rhode Island all have banned the use of subminimum wages for certain residents.
Many small business owners say that doing away with a subminimum wage will be financially disastrous to their companies; however, the Center for American Progress shows that enacting a fair minimum wage for all employees will help reduce poverty and improve the economy.
What is the Hourly Wage for Tipped Employees?
Federal law sets the minimum basic cash wage at $2.13 per hour, but many states mandate a higher level.
What is Tip Credit Against Minimum Wage?
Restaurant employees who receive tips are entitled to a wage of at least $2.13 per hour and more if their tips don’t equal at least federal minimum wage. Employers can claim a tip credit of up to $5.12 against federal minimum wage (if that is the minimum wage rate in their state.)
How Paycor Helps
In addition to state and federal minimum wage rates, cities in some states can set separate, higher wage rates. And while many rates are tied to the calendar year, some state rates change throughout the year. That’s where Paycor can help. For busy restaurant managers, owners and operators, our intuitive and easy-to-use payroll software can keep you compliant while making inaccuracies easy to catch. And, the entire process is as effortless as possible.
Let’s talk about how Paycor can help your team.
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.
