Employer Tip Credit Calculator
Calculate tip credits and verify tipped employees meet minimum wage.
Formula
Max Tip Credit = State Minimum Wage - Tipped Minimum Wage. Tips Per Hour = (Weekly Tips - Tip Pool) / Hours. Total Hourly = Tipped Wage + Tips/Hr. Make-Up Pay = max(0, Min Wage - Total Hourly) x Hours.
Frequently Asked Questions
What is the tip credit?
The tip credit allows employers to pay tipped employees a lower direct wage (as low as $2.13/hr federally) and count tips toward the minimum wage requirement. The employer must ensure total earnings (wages + tips) meet or exceed the full minimum wage.
Which states do not allow tip credits?
States that require full minimum wage for tipped employees (no tip credit) include Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. These states require employers to pay the full state minimum wage before tips.
What happens if tips do not meet minimum wage?
If an employee's direct wages plus tips do not equal or exceed the applicable minimum wage for all hours worked, the employer must make up the difference. This is calculated on a workweek basis, not per shift.
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