US FederalAre tipped employees entitled to the full minimum wage?
Yes, tipped employees must receive at least the federal minimum wage of $7.25 per hour, but employers may take a 'tip credit' of up to $2.13 per hour if certain conditions are met.
What the Law Says
The Fair Labor Standards Act (FLSA) sets the federal minimum wage and allows a special rule for tipped employees — but only if strict conditions are satisfied.
Under federal law, a 'tipped employee' is someone who regularly receives more than $30 per month in tips. Employers may pay such employees a direct cash wage as low as $2.13 per hour — but only if the employee's tips plus that cash wage equal at least the full federal minimum wage of $7.25 per hour.
If an employee’s tips combined with the employer’s cash wage do not equal $7.25 per hour, the employer must make up the difference. The employer must also inform the employee in advance about the tip credit provisions — including the amount of the cash wage, the tip credit claimed, and that all tips belong to the employee except in valid tip pools.
The law explicitly prohibits employers from keeping any portion of an employee’s tips — whether or not they take a tip credit — unless the tips are shared through a lawful tip pool among employees who customarily and regularly receive tips.
Statutory TextEvery employer shall pay to each of his employees who in any workweek is engaged in commerce… wages at a rate not less than… $7.25 an hour.
— 29 U.S.C. § 206(a)(1)(C) — Minimum wage
Statutory TextAn employer may take a tip credit… toward satisfying the minimum wage obligation… if such employee has been informed of this… and if all tips received by such employee have been retained by the employee…
— 29 U.S.C. § 203(m)(2)(A) — Tip credit conditions
Statutory TextThe amount of the tip credit… may not exceed $2.13 an hour.
— 29 U.S.C. § 203(m)(1)(A) — Maximum tip credit
What to Do
Confirm your employer pays you at least $2.13/hour in direct wages and informs you in writing about the tip credit.
Track your total earnings (cash wages + tips) weekly — if the average falls below $7.25/hour, your employer must pay the shortfall.
Ensure no manager or supervisor takes part in your tip pool — that violates federal law.
Keep records of hours worked and tips received for at least three years — the FLSA requires employers to do so, and it helps support any claim.
If your employer fails to meet these requirements, file a wage complaint with the U.S. Department of Labor’s Wage and Hour Division.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.