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What Is a Tip? Am I Considered a Tipped Employee?

A tip is a small sum of money given to someone for performing a service. Generally, a tipped employee engages in an occupation in which he or she customarily and regularly receives more than $20 to $30 a month in tips. Some jobs that traditionally rely on tips include bartenders, waiters, porters, and hairdressers.   

Can My Employer Keep My Tips?

Employers cannot keep an employee's tip, as it is the property of the tipped employee.   

May I Split or Pool My Tips with Others?

Tipped employees may arrange to split or pool their tips among other employees who customarily and regularly receive tips. However, tipped employees cannot be compelled to share tips with employees who customarily and regularly do not receive tips.   

What If My Tip was Charged to a Credit Card?

An employer who must pay a certain percentage of each sale to a credit card company may pay the employee a tip less the percentage. Tips charged to a credit card must be paid no later than the regular pay day and may not be held if the employer is awaiting reimbursement from the credit card company. 

What About Minimum Wage?

An employer of a tipped employee is only required to pay $2.13 per hour in wages if that amount combined with the tips received at least equals the federal minimum wage. Some cities and states require higher combined wage and tip totals for tipped employees than the federal government. If the wages and tips combined do not equal the minimum wage, the employer must make up the difference.   

Are Service Charges Considered Tips?

Compulsory charges for services are not considered tips and the employer must pay the entire minimum wage and overtime required by the Fair Labor Standards Act. 

Am I Required to Pay Income Tax?

Tips are generally subject to income taxes. Employees and employers both have responsibilities. 

  • Employee - Report tip income monthly
  • Employer - Collect taxes on tip income reported by the employee

Do I Need a Lawyer?

Whether you are an employer or employee, an employment attorney can help you with a tip dispute. If you are an employer, an employment lawyer will make sure you are in compliance with State and Federal wage laws and may prevent a dispute from arising.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 07-03-2018 08:32 PM PDT

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