Tipped Minimum Wage and Tip Credit Calculator
- Cash wage
- Employer make-up
- Tips
Cash wage plus tips is below $7.25 an hour. Pay $44.80 on the regular payday for this pay period.
How the tipped minimum wage and tip credit calculation works
Check whether a tipped worker's cash wage plus tips reaches the minimum wage for the week, how much tip credit the employer used, and any shortfall the employer must pay.
Work out the minimum wage for the week
Hours worked × the minimum wage. 40 hours at the federal $7.25 is $290.
Add the cash wage and the tips
40 hours at a $2.13 cash wage is $85.20. With $160 in tips the worker has $245.20.
The gap is the employer's make-up pay
$290 − $245.20 = $44.80. The employer must pay it, even though the worker earned tips.
The tip credit is the part tips cover
Federal law lets tips count for up to $5.12 an hour. Here tips covered $160 of the $204.80 maximum.
Worked example. A server works 40 hours at a $2.13 cash wage and receives $160 in tips. Minimum wage for the week is $290 (40 × $7.25). Cash wages of $85.20 plus $160 in tips is $245.20, so the employer must add $44.80. The tip credit used is $160, and the server earns $7.25 an hour in total.
Tipped Minimum Wage and Tip Credit FAQ
What is the tipped minimum wage?
Under federal law it is a $2.13 an hour cash wage, as long as tips bring the worker up to the $7.25 minimum wage. Many states set a higher cash wage, and some require the full state minimum wage before tips (US DOL).
What is a tip credit?
The part of the minimum wage an employer covers with the worker's tips. The federal maximum is $5.12 an hour: $7.25 minimum wage minus the $2.13 cash wage. The employer can only claim what the worker actually receives in tips.
What if tips don't make up the minimum wage?
The employer must pay the difference. The check is made for each workweek, and the make-up pay is due on the regular payday for that pay period (DOL Fact Sheet #15).
Which states don't allow a tip credit?
In the US DOL table of tipped minimum wages (effective July 1, 2026), Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington, plus Guam, require the full state minimum wage before tips. In these states, enter the state minimum as both the minimum wage and the minimum cash wage.
What is the tipped minimum wage in my state?
Look up your state in the DOL table of minimum wages for tipped employees and enter its combined rate and minimum cash wage. For example, that table (effective July 1, 2026) lists Arizona at $15.15 with a $12.15 cash wage. Local minimum wages can be higher still.
Who counts as a tipped employee?
Under federal law, someone who customarily and regularly receives more than $30 a month in tips. Several states set a different monthly amount.
Can the tip credit apply to non-tipped work?
No tip credit is allowed for hours in a separate non-tipped job, such as maintenance work done by a hotel employee who also has a tipped job. Enter only the hours in the tipped job.
Sources: US DOL: Fact Sheet #15, Tipped Employees Under the FLSA · US DOL: Minimum Wages for Tipped Employees (state table, effective July 1, 2026)