Server Tip Credit FLSA Calculator (US 2026)
A federal Fair Labor Standards Act (FLSA) tip credit lets restaurants pay servers, bartenders, and other tipped staff a sub-minimum cash wage as low as $2.13/hour, as long as tips bring the worker to at least the full federal minimum wage of $7.25/hour. Many states override this with higher floors or eliminate the tip credit entirely. This calculator checks federal compliance, applies your state's rule, and tells you exactly how much your employer must "true up" if total pay falls short. Updated for 2026 federal and state minimum wages. Runs in your browser. Private. Not legal advice.
How the Federal FLSA Tip Credit Works
Under the Fair Labor Standards Act (FLSA), an employer can pay a "tipped employee" (one who customarily receives more than $30/month in tips) a cash wage as low as $2.13/hour, claiming a tip credit of up to $5.12/hour against the federal minimum wage of $7.25/hour. Three conditions must be met: (1) the tipped employee must actually receive enough tips to reach $7.25/hour combined, (2) the employer must inform the worker of the tip credit in writing before claiming it, and (3) the employee must keep all their tips except for valid tip pools with other tipped workers. If tips fall short in any workweek, the employer must "true up" — pay the difference to bring the total to $7.25/hour. Source: US Department of Labor — Minimum Wages for Tipped Employees.
States That Override Federal Tip Credit Rules
Seven states (California, Nevada, Washington, Oregon, Alaska, Minnesota, Montana) have eliminated the tip credit entirely: tipped workers must be paid the full state minimum wage in cash, and tips are on top. California's 2026 minimum is $16.50/hour for all employees including servers — no $2.13 cash wage exists. Other states keep a tip credit but raise the cash floor: New York requires $10.65 cash + $5.35 credit (= $16.00 total), New Jersey $5.62 + $9.87 (= $15.49), Massachusetts $6.75 + $8.25 (= $15.00), Illinois $9.00 + $6.00 (= $15.00). State law always wins when more generous than federal — you take the higher number. Some cities (San Francisco, Seattle, NYC) layer additional local minimums on top of state.
Employer Top-Up Obligation Per Workweek
The compliance test is run per workweek, not per shift or per pay period. Sum all hours, all cash wages, and all tips for the week, divide by hours worked, and compare to the applicable minimum. If a server worked 32 hours, was paid $68.16 in cash wages ($2.13 × 32), and received $80 in tips, the total is $148.16 ÷ 32 = $4.63/hour — far below $7.25. The employer must immediately add $83.84 to bring weekly pay to $232 ($7.25 × 32). Slow weeks happen — Tuesday lunches, off-season — and the law explicitly requires top-up regardless of how generous prior weeks were. Pooling tips across weeks to mask shortfalls is a common employer violation that triggers DOL back-pay liability and double-damages under 29 USC §216(b).
The 80/20 Rule and Dual-Job Tasks
The DOL's 2024 final rule restored a stricter "80/20" test: an employer can claim the tip credit only on time the worker spends doing tip-producing work or tip-supporting work that is "directly supporting" tipped duties. If a server spends more than 20% of their week (or any continuous 30 minutes) on non-tipped duties — deep-cleaning the kitchen, painting, prepping bulk side dishes — the employer must pay full minimum wage for that time, with no tip credit. This rule was vacated by the 5th Circuit in Rest. Law Ctr. v. DOL (2024) for federal contractors but remains enforceable in most states; California, NY, and others enforce stricter versions. Source: DOL Fact Sheet #15: Tipped Employees Under the FLSA. Last updated: 2026-05-03.