Tip Credit Definition

A tip credit reduces the minimum wage an employer is responsible for paying for tipped employees who make up the difference through tips.

Tip Credit Extended Definition
Employers of tipped employees can take a tip credit toward the federal minimum wage and pay tipped employees a minimum cash wage. Tipped workers typically include those in restaurant and hospitality industries.

The federal minimum wage is $7.25 USD per hour. The federal minimum wage for tipped employees is $2.13 per hour. The difference between the two, the actual “tip credit” is $5.12 per hour.

Last Updated By

Rachel Blakely-Gray | May 01, 2023

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