Tennessee minimum wage and tip credit for restaurants (2026)

Tennessee is one of a handful of states with no minimum wage law of its own, which means the federal rules are the rules for most restaurants. That sounds simple, but it hides detail that matters for payroll: the tipped cash wage, the notice you must give, what counts as a tipped employee and how overtime works. This guide explains each, and how to set pay so that it still attracts staff in a competitive market like Nashville. It is general information, not legal advice. The U.S. Department of Labor is the place to confirm every figure.

What is the minimum wage in Tennessee?

Tennessee has no state minimum wage law, so the federal minimum wage of $7.25 an hour applies to employees covered by the Fair Labor Standards Act. Tennessee law also bars cities and counties from setting a higher local minimum. Most restaurants are covered by the federal law, so plan payroll around $7.25 as a legal floor, and recognize that the real market rate is usually higher.

What is the tipped cash wage?

Under federal law, you can pay a tipped employee a cash wage of $2.13 an hour and claim a tip credit of up to $5.12 an hour, as long as the worker's cash wage and tips together equal at least $7.25 for every hour worked. If tips fall short in a week, you must make up the difference. The tip credit is optional, and many Tennessee restaurants pay a higher cash wage to compete for experienced servers and bartenders, especially in busy tourist areas.

Who counts as a tipped employee?

A tipped employee is one who customarily and regularly receives more than $30 a month in tips. Servers, bartenders and bussers who receive tips usually qualify. Cooks and dishwashers do not, so they must be paid the full minimum in cash. Classify roles carefully, and keep written job descriptions. A host who does not receive tips directly, or a barback who is paid a share of tips by a bartender, can be a gray area, so ask the Department of Labor or a payroll professional before you decide. Misclassifying a role means you owe the full wage for every hour, plus possible penalties.

What notice must you give?

Before taking the tip credit, tell each tipped employee, ideally in writing, that you are using it, what cash wage you will pay, the amount of the credit, that the credit cannot exceed the tips they receive, that they keep all their tips apart from a lawful pool, and that the credit will end if they do not receive enough tips. Keep a signed copy. If you cannot show the notice, a Department of Labor investigator may treat the credit as not valid.

How do you calculate make-up pay?

Each workweek, add the cash wage paid and the tips the employee reported, divide by the hours worked, and compare the result with $7.25. If it is lower, you owe the difference for that week. Run this check weekly, not annually, and look closely at weeks when an employee worked a slow shift pattern. Keep time records for every hour and tip records for every pay period, and keep them for as long as federal rules require. If you ever face an investigation, records that are complete and easy to find end the matter faster than any argument.

How does overtime work?

Overtime for a tipped employee is based on the full minimum wage, not the cash wage, and the tip credit is deducted afterward. Many payroll systems apply the cash wage by default, which creates underpayment on every long week. Ask your provider to show the formula for a 45-hour week and test it with a real pay stub.

What about tip pooling?

Employees who customarily receive tips can pool them, but employers and managers cannot take any part of the tips. If you take a tip credit, pools are limited to employees who customarily and regularly receive tips. Keep a written policy that states who is in the pool and how shares are divided. Share the policy with new hires on day one, and update it if you change the roles in the pool. Tips from cards are tips, too, so pay them out on the same schedule as cash tips, and make sure any card processing fee is handled as the law allows.

How should you set pay in a competitive market?

The legal floor is low, but the market is not. A busy Nashville bar or restaurant competes with other businesses for a limited pool of experienced staff, so the real question is what total pay attracts and keeps them. Track what your servers actually earn per hour including tips, and share the numbers when you hire. Consider a higher cash wage on slow shifts, a guaranteed minimum for new hires during training, and predictable schedules, which many workers value as much as pay. Post schedules two weeks ahead, allow shift swaps without a fight, and thank staff openly. In a city where a server can walk down the street and find a new job, the way you treat people is part of what you pay.

Are you short of guests as well as staff?

Wages are only half the sum, and the other half is how many guests fill the shifts you pay for. Mosey is a food-first app where diners search by dish and mood, rate what they ate and keep lists of places they want to try, and where independent restaurants and cafes get tools for their own page, menu and regular guests. If you want more of your paid hours to be busy hours, being found by the dish is what Mosey is built around.

More guides for your business:

• Tennessee sales tax on restaurant food and drinks: what to charge
• Best software for a small restaurant in 2026: how to choose
• How Boston restaurants can fill January and February

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