Tip credit rules in five states: UT, PA, CT, NC and GA

A tip credit lets an employer count part of a worker's tips toward the minimum wage, so the employer pays a lower cash wage. Whether you can use it, and how much it is, depends on the state. In the five states in this guide, the answers range from the federal baseline of 2.13 dollars an hour to a figure near 6.38 dollars. The numbers below come from the US Department of Labor and state labor departments. Wage rules change, so confirm your state's current figure with its labor department before you set payroll.

How does the tip credit work in general?

The federal rule is the starting point. The Department of Labor's table lists a 7.25 dollar minimum wage, a 2.13 dollar cash wage for tipped employees and a maximum tip credit of 5.12 dollars, for employees who regularly receive more than 30 dollars a month in tips. The employer must tell the employee about the arrangement before taking the credit, and if tips fall short the employer must pay the difference. States may set higher cash wages, and some bar the credit entirely. None of the five states here does.

What does Utah allow for tipped pay?

Utah follows the federal numbers: the Department of Labor's table lists a 7.25 dollar minimum, a 2.13 dollar cash wage and a 5.12 dollar maximum credit. The employer must make up any shortfall, and the safer approach is to tell each employee about the credit in writing at hire. Confirm the current figure with the Utah Labor Commission before you set payroll.

What does Pennsylvania allow for tipped pay?

Pennsylvania's tipped cash wage is 2.83 dollars an hour with a 7.25 dollar minimum wage, and the Department of Labor and Industry's rules in effect since August 2022 set the tipped-employee threshold at 135 dollars a month in tips. Confirm the current figure with the Department of Labor and Industry, and ask it about overtime weeks and how card fees may be handled.

What does Connecticut allow for tipped pay?

Connecticut is the outlier. The Department of Labor's 2026 tip statement form lists a 16.94 dollar minimum wage, a server cash wage of 6.38 dollars and a bartender cash wage of 8.23 dollars. Ask the department about any planned change to the credit. Read our Connecticut wage guide for detail.

What does North Carolina allow for tipped pay?

The state Department of Labor says an employer must pay tipped employees at least 2.13 dollars an hour as long as tips make up the difference to the 7.25 dollar minimum, and the employer is responsible for making sure all tipped employees earn at least the minimum in cash and tips. Ask the North Carolina Department of Labor about any tip reporting or certification step before you set payroll. If you take the credit, a signed record each pay period is cheap protection either way.

What does Georgia allow for tipped pay?

Georgia law does not set its own tipped wage. The state Department of Labor says that, with limited exceptions, the federal minimum wage applies, so the federal rules govern: the Department of Labor's table lists a 2.13 dollar cash wage with tips making up the rest of 7.25 dollars. Ask the state department whether any narrow exception applies to your business.

What mistakes cost the most?

1. Treating all employees on the floor as tipped. Runners, bussers and dishwashers who do not receive tips generally must be paid the full minimum.
2. Not tracking the shortfall. If tips fall short in a slow week, you owe the difference.
3. Letting managers take part of the tip pool. Managers and owners may not keep tips.
4. Charging staff for walkouts, breakage or card fees from their tips, which many states restrict.
5. Mixing roles. An employee who works as a server and a cook in the same shift needs hours tracked by job.

How should you build a tip policy?

Write it down. State how tips are collected, pooled and paid, how often they are paid out, who participates and how disputes are handled. Under federal rules, employers who do not take the credit may include back-of-house staff in a pool, while employers who take it must limit pools to staff who customarily receive tips. Our US-wide guide to tip pooling and service charges explains the options. Give the policy to every new hire and keep a signed copy.

What should you do this month?

Compare your payroll against your state's numbers. Check whether your point-of-sale system records tips by job and shift. Ask your accountant to confirm that you are meeting the notice and record requirements. Put a reminder in your calendar to check for law changes each January and July.

How do you explain the tip credit to new hires?

Give each new server and bartender a one-page notice that states the cash wage, how tips make up the rest of the minimum wage, who participates in any pool and how often tips are paid out. Ask them to sign it, and keep a copy. A new hire who understands the arrangement on the first day is far less likely to feel surprised when a slow week arrives and the employer has to make up the difference.

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• Boston liquor license quota and costs: what a new restaurant faces
• How to respond to a bad online review of your restaurant
• Is your restaurant menu accessible? PDF vs web page and an ADA checklist

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