Tipped Minimum Wage — In Plain Words

What “tipped employee” means, in DOL’s words

DOL’s Fact Sheet #15 says: “Under the FLSA, a tipped employee is an employee engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.”

DOL’s Tips page says the same thing in shorter words: a tipped employee works in a job in which he or she customarily and regularly receives more than $30 per month in tips.

DOL also says only tips actually received by the employee count when deciding whether the employee is a tipped employee and when the tip credit is used.

The federal floor, as DOL states it

Fact Sheet #15 states the federal minimum wage this way: the federal minimum wage “is currently $7.25 per hour.”

Fact Sheet #15 states the direct wage this way: “An employer must pay a tipped worker at least $2.13 per hour under the FLSA.”

Cash wage means the wage the employer pays directly to the tipped employee. DOL uses the words “direct wage” and “cash wage” for the same thing. Fact Sheet #15 calls it “the direct wage, or the cash wage it pays directly to the tipped employee.”

Those two figures — $7.25 per hour and $2.13 per hour — are the federal figures as DOL prints them today on Fact Sheet #15. DOL’s state table prints the same federal figures in its FEDERAL row. See the dated-table section below.

The tip credit idea, in plain words

Tip credit is DOL’s name for this idea: the FLSA lets an employer count part of a tipped employee’s tips toward the employer’s minimum wage duty.

Fact Sheet #15 says: “The FLSA permits an employer to take a tip credit toward its minimum wage and overtime obligation(s) for tipped employees per Section 3(m)(2)(A).”

Fact Sheet #15 explains the size of the credit this way. An employer can take a tip credit equal to the difference between the direct (or cash) wage it pays and the federal minimum wage, which is currently $7.25 per hour.

Fact Sheet #15 states the most the credit can be: “The maximum tip credit that an employer can currently claim is $5.12 per hour: ($7.25 - $2.13 direct (or cash) wage = $5.12).”

Fact Sheet #15 also says an employer that claims a tip credit must ensure that the employee receives enough tips from customers, and direct (or cash) wages per workweek, to equal at least the minimum wage and overtime compensation required under the FLSA.

If tips fall short in a workweek

Fact Sheet #15 says employers claiming a tip credit must be able to show in each workweek that tipped employees receive at least the full federal minimum wage when direct (or cash) wages and the tip credit amount are combined.

Fact Sheet #15 states the shortfall rule in general words: “If an employee’s tips combined with the employer’s direct (or cash) wages do not equal the minimum hourly wage of $7.25 per hour in each workweek, the employer must make up the difference.”

DOL’s Tips page states the same general rule without printing the $7.25 figure: if the employee’s tips combined with the employer’s direct wages of at least $2.13 per hour do not equal the federal minimum hourly wage, the employer must make up the difference.

Notice before a tip credit is taken

Fact Sheet #15 says employers must provide information to tipped employees before taking a tip credit under the FLSA. In DOL’s list, that information is:

• the amount of the direct (or cash) wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
• the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12, described by DOL as the difference between the minimum required direct (or cash) wage of $2.13 and the current minimum wage of $7.25;
• that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
• that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
• that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Fact Sheet #15 says employers may provide oral or written notice of those items, and that an employer that fails to provide the required information cannot take the tip credit.

Tips, tip pools, and keeping tips

Tip pool is DOL’s term for an arrangement where employees share or pool tips with other eligible employees. Fact Sheet #15 says the FLSA allows employers to require employees to share or “pool” tips with other eligible employees, and that the rules for tip pools depend on whether the employer pays a direct (or cash) wage equal to the full minimum wage or not.

Fact Sheet #15 states this rule in general words: regardless of whether an employer takes a tip credit, the FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool. It also says an employer may not require an employee to give their tips to the employer, a supervisor, or a manager, even where a tipped employee receives at least the federal minimum wage (currently $7.25) per hour in wages directly from the employer and the employer takes no tip credit.

Fact Sheet #15 also covers dual jobs, credit cards, service charges, and recordkeeping for tipped employees. This page does not restate those parts. Read Fact Sheet #15 itself, in the Sources below, for DOL’s full wording on them. One point DOL makes there, in its own words: a compulsory charge for service is not considered a tip under the FLSA.

How state law fits in

Fact Sheet #15 states the general rule this way: “When state law differs from the federal FLSA, an employer must comply with the standard most protective to employees.”

As examples, Fact Sheet #15 says some states require a higher cash wage than the federal direct (or cash) wage of $2.13 per hour, and in some cases states prohibit the taking of a tip credit.

DOL’s Tips page says it more briefly: many states require higher direct wage amounts for tipped employees.

This page prints no state figures of its own, apart from the one fenced Oklahoma row in the next section, which is quoted from DOL’s dated table itself. For any state’s figures, use DOL’s dated table in the next section, or your state labor department. Fact Sheet #15 points readers to DOL’s state contact page for links to state labor departments.

DOL’s state table, with its date printed on the table

DOL keeps a table called “Minimum Wages for Tipped Employees.” Its full heading is “Table of Minimum Hourly Wages for Tipped Employees, by State.”

DOL dates that table in two places on the page itself. At the top, the page is headed “July 1, 2026.” At the bottom, DOL prints: “This document was last revised July 1, 2026.” The table was prepared by the Division of Fair Labor Standards Act and Child Labor, Wage and Hour Division, U.S. Department of Labor, as printed on that page.

DOL adds this note on that page: the Wage and Hour Division tries to ensure that the information on the page is accurate, but individuals should consult the relevant state labor office for official information.

This page does not copy the full state table. The table covers every state and lists, for each one, the basic combined cash and tip minimum wage rate, the maximum tip credit, the minimum cash wage, and how that state defines a tipped employee by tips received. Use the table itself, at the link in the Sources below, to look up your own state in that July 1, 2026 edition.

The table’s FEDERAL row agrees with Fact Sheet #15. As printed in that July 1, 2026 table, the FEDERAL row reads: Basic Combined Cash & Tip Minimum Wage Rate $7.25; Maximum Tip Credit Against Minimum Wage $5.12; Minimum Cash Wage $2.13; Definition of Tipped Employee: More than $30.

What this page does not cover

This page does not decide what any one reader is owed, and it does not decide any one workplace’s pay. It explains the federal rule only as DOL states it in general.

This page does not copy DOL’s full state table, and it prints no state figures beyond the one fenced Oklahoma row above, quoted from that dated table. State figures change, and states differ from each other. Check the dated DOL table, or your state labor office, for a state’s own figures.

This page gives no advice about any person’s own pay case.

For more information, Fact Sheet #15 gives DOL’s Wage and Hour Division website and its toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243). Fact Sheet #15 also carries DOL’s own note, printed here as DOL prints it: “This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations.”

Words to know

Tipped employee: In DOL’s words, an employee engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips.

Cash wage / direct wage: The wage the employer pays directly to the tipped employee. DOL uses “direct (or cash) wage” for this. Fact Sheet #15 states the federal figure as at least $2.13 per hour.

Tip credit: The FLSA provision that permits an employer to take a credit, based on tips actually received, toward its minimum wage obligation for tipped employees. Fact Sheet #15 states the maximum as $5.12 per hour.

Federal minimum wage: Stated on Fact Sheet #15 as currently $7.25 per hour.

Tip pool: An arrangement where employees share or pool tips with other eligible employees, as described on Fact Sheet #15.

FLSA: The Fair Labor Standards Act, the federal law Fact Sheet #15 is about.

Workweek: The unit DOL uses on Fact Sheet #15 when it says the combined wages and tip credit must reach at least the full federal minimum wage in each workweek.

This page is general information only. It is not legal advice.

Only DOL and your state labor office can speak to your own case. This page decides nothing.