Tip credit calculator
If you are paid a tipped cash wage, your employer is taking a tip credit: counting part of your tips toward the minimum wage. That is only allowed if your cash wage plus the tips you keep come to at least minimum wage for the workweek. Enter one week's hours, cash wage, tips and tip-out, and the calculator shows your tips per hour, your real hourly rate and the make-up pay you are owed if the week falls short.
Cash wages plus tips come to $2.13 an hour, below the $7.25 minimum. Your employer must make up $153.60 for this workweek (29 U.S.C. 203(m)).
How to use this calculator
- Enter the hours you worked this workweek. The minimum wage test is applied per week, not per shift.
- Enter the cash wage your employer pays per hour. The federal tipped minimum is $2.13; many states require more.
- Enter the minimum wage that applies to you. The federal rate is $7.25; use your state or city rate if it is higher.
- Enter the tips you received and any tip-out you paid to other staff or a pool. Only the tips you keep count.
- Read the result: tips per hour, your effective hourly rate, and whether the week clears minimum wage.
How the tip credit works
Under 29 U.S.C. 203(m), an employer may pay a tipped employee a cash wage as low as $2.13 an hour and count up to $5.12 an hour of tips toward the $7.25 federal minimum wage. The credit is allowed only if the employee is told about it, keeps all tips except for a valid tip pool, and actually receives enough in tips to reach the minimum wage. If tips fall short in a workweek, the employer must make up the difference.
Many states set a higher cash wage for tipped workers, a smaller tip credit, or no tip credit at all, in which case the full state minimum wage is owed in cash before tips. The calculator uses federal figures by default; enter your state's cash wage and minimum wage to test against your own rule.
Tip-outs and tip pools
Tips belong to the employee. Employers, managers and supervisors may not keep any portion of them (29 U.S.C. 203(m)(2)(B)). A mandatory tip pool among employees who customarily receive tips is allowed, and if the employer takes a tip credit the pool can include only those employees. Money you tip out to a valid pool is no longer yours, so this calculator subtracts it before testing against minimum wage.
Overtime for tipped workers
Overtime for a tipped employee is calculated on the full minimum wage, not on the cash wage. At the federal rates, the overtime rate is 1.5 × $7.25 = $10.88, and the employer may still take the $5.12 tip credit, leaving a cash overtime wage of $5.76 an hour. An employer that pays 1.5 × $2.13 for overtime is underpaying.
Frequently asked questions
What is the federal tipped minimum wage?
$2.13 an hour in cash, with a maximum tip credit of $5.12, so that cash wage plus tips must reach $7.25 (29 U.S.C. 203(m)). Many states require a higher cash wage or allow no tip credit at all.
What happens if my tips do not reach minimum wage?
Your employer must pay the difference for that workweek. The test is cash wages plus tips kept, divided by hours, compared with the applicable minimum wage.
Do tip-outs count against me?
Tips you hand to a valid tip pool or to other tipped staff are not yours, so they do not count toward meeting minimum wage. Enter them as tip-out and the calculator excludes them.
Can my manager take part of the tip pool?
No. Employers, managers and supervisors may not keep any portion of employees' tips, whether or not the employer takes a tip credit (29 U.S.C. 203(m)(2)(B)).
How is overtime calculated for servers?
On the full minimum wage, not the cash wage. Federally, 1.5 × $7.25 = $10.88 an hour, minus the tip credit of $5.12, gives a cash overtime wage of $5.76. Your state may require more.
Is the minimum wage test per shift or per week?
Per workweek. A slow Monday and a busy Saturday are averaged within the same week, but one week's tips cannot cover a different week's shortfall.
Does credit card processing come out of my tips?
Federally, an employer may deduct the card processing fee on the tip itself, but no more, and only if doing so does not drop you below minimum wage. State rules vary.
Related calculators
This calculator produces estimates for your own records. It is not payroll, tax or legal advice. Overtime rules vary by state, industry and employer policy. Sources: U.S. Department of Labor, 29 CFR Parts 516, 778 and 785; state labor codes named above.