Federal Tipped Minimum Wage: The $2.13 Cash Wage Explained

Under the federal Fair Labor Standards Act (FLSA), an employer may pay a tipped employee a direct cash wage as low as “$2.13 per hour” (DOL Fact Sheet #15), and claim a “tip credit” of up to “$5.12 per hour” (DOL Fact Sheet #15) against the tips that employee earns. Added together, the $2.13 cash wage and the $5.12 maximum tip credit equal the $7.25 federal minimum wage. This applies only to workers who “customarily and regularly receive more than $30 a month in tips” (DOL Fact Sheet #15) — the FLSA’s threshold for counting as a “tipped employee” in the first place.

This original record-reading guide is a general reading aid, not cited evidence. It does not depict a source record; the article text and source links provide the facts.

Key points

• The federal minimum direct cash wage an employer may pay a tipped employee is $2.13 per hour.
• The maximum tip credit an employer may claim against that cash wage is $5.12 per hour; $2.13 + $5.12 = $7.25, the federal minimum wage.
• To be a “tipped employee” under the FLSA, a worker must customarily and regularly receive more than $30 a month in tips.
• Employers, managers, and supervisors may never keep any portion of an employee’s tips, whether or not a tip credit is claimed.
• Where state law sets a higher standard than the FLSA, the employer must follow the state rule instead.

Cash wage and tip credit

The FLSA sets a federal floor, not a fixed wage: employers may pay tipped employees a direct cash wage of “$2.13 per hour” (DOL Fact Sheet #15). To make up the difference to the standard $7.25 federal minimum wage, employers may claim a tip credit — the portion of the minimum wage they assume tips will cover — of up to “$5.12 per hour” (DOL Fact Sheet #15). The cash wage plus the maximum credit is what reaches $7.25 an hour under federal law.

Who counts as a “tipped employee”

The tip-credit rule does not apply to every worker who occasionally receives a tip. Under the FLSA, it applies to employees who “customarily and regularly receive more than $30 a month in tips” (DOL Fact Sheet #15). That $30-a-month threshold is the federal definition that determines whether the $2.13/$5.12 framework applies to a given worker at all.

Tips always belong to the employee

Separate from the wage math, the FLSA draws a flat line on who may keep tip income. The Department of Labor states that “the FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool” (DOL Fact Sheet #15). This prohibition applies regardless of whether the employer is claiming a tip credit — managers and supervisors are barred from keeping any part of an employee’s tips either way.

Higher state floors

The federal numbers above are a floor, not a ceiling. As the Department of Labor states, “When state law differs from the federal FLSA, an employer must comply with the standard most protective to employees” (DOL Fact Sheet #15). Some states require a higher direct cash wage than $2.13 an hour, and some do not allow employers to claim a tip credit at all — in either case, the state rule controls.

A note on this source

DOL Fact Sheet #15 carries no revision date or version stamp anywhere on the page, unlike several sister fact sheets in the same Wage and Hour Division series. That is a documented feature of this particular record rather than an editing error, but it means a reader cannot date this specific statement of the $2.13/$5.12/$30 figures from the page itself.

What this article does not answer

This article does not evaluate whether any specific tip pool arrangement is lawful, whether a reader’s own employer has actually taken a valid tip credit in their case, or what tipped cash wage applies under any particular state’s law — some states require a higher tipped cash wage than the federal $2.13 floor, and some prohibit the tip credit entirely. Readers with a state-specific or employer-specific question should consult their state labor agency or the full text of DOL Fact Sheet #15 rather than treat the federal figures above as a complete answer for their situation.

Source links

https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa