June 25, 2015

Federal and State Tip Credit Allowances

A recent OLR report describes how the “tip credit” is applied under federal and state laws.

A “tip credit” generally allows an employer to count certain employees’ tips towards a portion of their minimum wage requirement. It reduces the employer’s share of the minimum wage by allowing the employer to pay a lower “tipped minimum wage,” as long as the employee’s tips make up the difference. If the tipped minimum wage plus the employee’s tips do not meet the minimum wage requirement, the employer must make up the difference.

Federal law allows a $5.12 per hour tip credit and a $2.13 per hour tipped minimum wage. It also allows states to set higher minimum wage requirements and base their tip credits on this higher wage. Connecticut law currently allows a $3.37 per hour tip credit and a $5.78 per hour tipped minimum wage for most hotel and restaurant employees in positions that customarily receive tips (i.e., wait staff). It also allows a $1.69 per hour tip credit and $7.46 per hour tipped minimum wage for bartenders.

According to the U.S. Department of Labor, seven states have no tip credit and require employers to pay the full state minimum wage to tipped employees, 17 states allow employers to pay the $2.13 per hour tipped minimum wage allowed by federal law, and 26 states provide a tip credit but require employers to pay a tipped minimum wage that is higher than the $2.13 per hour required by federal law.

For more information, click here to read the full report.