Maximum Tip Credit

• The maximum tip credit depends on the prevailing minimum wage and state law. Some states, such as California, Alaska and Minnesota, require employers to pay the prevailing minimum wage regardless of whether an employee receives tips or not. While the Fair Labor Standards Act sets the maximum tip credit at $5.12 per hour, states can go above or beyond this as long as the employee earns $2.13 per hour, as of the date of publication.
  
  

Other State Laws

• Some states allow a tip credit if the combination of paid wages and tips exceed the minimum for the employee's industry. Other states, such as Connecticut, index the tip credit to a percent of the current minimum wage. Another possible scenario is to allow a partial maximum based on the combined tips and wages. Maryland allows a tip credit of up to 50 percent of the minimum wage. New York has some of the more complicated tip credit laws. There, the maximum tip credit depends on how much the employee earns per hour and the industry in which he works.
  
  

Considerations

• For the employer to take a tip credit, the employee must qualify as a tipped employee. Even if an employee's position is regularly tipped, he usually must receive a certain amount in tips per month to be a bona fide tipped employee. The amount of tips a person must receive usually varies from $20 to $35 total per month.
  
  

Tip

• In 2011, the Department of Labor issued new regulations for tip credits. The employer must inform the employee that the company will take a tip credit against his wages, the value of the tip credit and that the credit will no be more than the value of the tips. The employer can require employees pool tips, but only people that regularly receive tips can participate, according to Jackson Lewis Workplace Resource Center.