Nobody ever told me I was being paid with a tip credit. Doesn’t my employer have to tell me?
The short answer
What to check
Here are the five items DOL lists, with what the notice might sound like at $2.13 an hour (illustrative wording).
| What you must be told | What it might sound like |
|---|---|
| 1. Your cash wage, at least $2.13 an hour | “We pay you $2.13 an hour in cash wages.” |
| 2. The tip credit amount, no more than $5.12 | “We count $5.12 an hour of your tips toward the $7.25 minimum.” |
| 3. The credit can’t be more than the tips you actually get | “If your tips don’t cover it, we make up the difference.” |
| 4. You keep all your tips, except for a valid tip pool of tipped workers | “Your tips are yours, apart from the tip pool with bussers and bartenders.” |
| 5. The credit doesn’t apply unless you were told all this | “We can’t take the tip credit unless we’ve told you these rules.” |
What’s at stake: for a 30-hour week at $2.13, the tip credit your employer counts is $153.60 ($5.12 × 30).
If your employer requires a tip pool, federal rules also say it has to tell you the required contribution amount.
Not tax or legal advice. The wording and hours are made up. DOL doesn’t require a particular script.
Plain English
What a tip credit is
Federal law lets an employer pay a tipped worker as little as $2.13 an hour in cash and count up to $5.12 an hour of the worker’s tips toward the $7.25 federal minimum wage. That $5.12 is the tip credit. If your cash wage plus tips doesn’t reach $7.25 an hour for the workweek, your employer has to make up the difference.
The notice rule
DOL’s tipped-employee fact sheet says employers must give tipped employees the five pieces of information above before taking a tip credit. The notice can be oral or written. The federal regulation says an employer isn’t eligible to take the tip credit unless it has informed its tipped employees in advance.
DOL’s fact sheet states the result plainly: an employer that fails to provide the required information cannot take the tip credit.
Tip pools
When an employer takes a tip credit and requires a tip pool, federal rules say the pool can include only workers who customarily and regularly receive tips, and the employer has to tell you any required contribution amount. See Can my employer make me tip out or join a tip pool?
Your state may have stricter rules
DOL says some states require a higher cash wage than $2.13 or don’t allow a tip credit at all, and that your employer has to follow whichever rule protects you more. DOL keeps a list of state labor offices.
Where to ask
DOL’s Wage and Hour Division takes calls at 1-866-487-9243. See Is my manager allowed to do that?
Common mistakes
- Assuming a line on the pay stub is the same as being told all five items.
- Not keeping the offer letter, handbook page, or poster that explains your pay.
- Forgetting that the tip credit also depends on your tips actually covering it each week.
Official sources
- U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the FLSA (notice to tipped employees)dol.gov
- 29 CFR 531.59, the tip wage credit (advance notice)ecfr.gov
- 29 CFR 531.54(c), tip pools when an employer takes a tip creditecfr.gov
- U.S. Department of Labor, Wage and Hour Division: State Labor Officesdol.gov
Last verified:
Checked DOL Fact Sheet #15 and 29 CFR 531.54 and 531.59 on eCFR (current through September 21, 2026).
Still open: What an employer owes if it skipped the notice depends on the facts and isn’t calculated here.