Illinois tipped minimum wage: state, Cook County and Chicago

Illinois sets a state minimum wage of $15.00 an hour and lets a restaurant pay tipped employees a lower cash wage of $9.00, using a tip credit of up to 40 percent of the minimum, according to the U.S. Department of Labor's state table. Cook County and Chicago set higher local minimum wages of their own, and both change on a schedule, so the address of your restaurant decides which numbers you use. This guide explains how the layers fit together and what to do each time a rate changes.

What is the statewide rate?

The Department of Labor's state table lists Illinois with a $15.00 basic combined cash and tip minimum, a maximum tip credit of 40 percent of the applicable minimum wage, which is $6.00, and a minimum cash wage of $9.00. A restaurant outside Cook County and Chicago, in a town with no ordinance of its own, uses the state numbers. Check the Illinois Department of Labor each year, because the state figures are the floor and not always the number that applies to you.

What changes for Cook County?

Cook County has its own minimum wage ordinance, with a separate rate for tipped workers, and it covers the suburbs that do not set their own rules. Some municipalities have opted out or adopted rules of their own, so check your village or city. If your restaurant is in a suburb of Cook County, ask the county or the municipality which ordinance applies, and read their published rates rather than relying on a summary that may be a year old.

What changes for Chicago?

Chicago sets its own minimum wage, higher than the state's, and it has been moving its tipped rate toward the regular rate by phasing out the tip credit over time. Because that schedule has been debated and can be adjusted, read the notice from the Chicago Department of Business Affairs and Consumer Protection each year and plan your payroll from it, not from a news report.

A worked example with made-up rates

A server works 30 hours at a $10.00 cash wage, which is $300. If the applicable minimum for that location were $15.00, the minimum for 30 hours would be $450, so tips must cover the $150 difference for the week or you pay the balance as make-up pay. On a slow week with $120 in tips, you owe $30. The rates in this example are invented to show the arithmetic. Use your own jurisdiction's published rates, and test each week, not each month.

How does the tip credit work?

The tip credit is the amount you may count toward the minimum wage from the tips an employee keeps. You must tell employees the cash wage, the credit amount and that the credit cannot exceed their tips. The federal fact sheet on tipped employees sets out the notice, and Illinois and local rules can add to it. A signed notice at hire is the easiest to prove.

How is overtime paid?

Overtime for a tipped employee is built from the full minimum wage, not from the cash wage, and the tip credit is then subtracted. Check the payroll system on this point, since a default based on the cash wage underpays overtime on every check.

What if you work in more than one jurisdiction?

If your business has locations in Chicago, suburban Cook County and downstate, each has its own numbers, and payroll must be set by work location. An employee who works in two places in one week needs hours recorded by location so each is paid at the right rate.

What should you do each time a rate changes?

1. Read the new notices from the state, Cook County and Chicago before the effective date.
2. Update payroll settings before the date, not after.
3. Issue new written notices to tipped employees.
4. Replace the posted wage notice.
5. Review offer letters and the handbook.

Keep time records, cash wages paid, tips reported and any make-up pay, together with the notices and the dates you updated the rates. A claim for unpaid wages can reach back years.

How should you plan labor cost?

A higher tipped cash wage changes the cost of every server hour. Before a rate change, work out your labor percentage with the new rates for your average week, and compare it with the previous year. Look at the slow shifts, where a server's tips may not cover the gap and you owe make-up pay. Some owners trim the least profitable hours, others review the menu prices or cross-train staff. Whatever you choose, tell staff about schedule changes early, since a team that hears about changes from a manager keeps its trust.

What should you tell new hires?

Tell every new tipped employee the cash wage, the credit amount and how make-up pay works, in writing and on day one. Say which ordinance applies to your location and where the posted notices are. Ask them to sign and keep a copy in their file. New hires often start mid-week or mid-pay-period, so explain how the first partial week is calculated. A clear explanation at hire answers most questions before they become complaints.

More guides for your business:

• Illinois tip pooling and service charges for restaurants
• Chicago paid leave and paid sick leave for restaurants
• Chicago fair workweek rules for restaurants

More in the US guides for food businesses.