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WHAT IS TIP CREDIT?
Typically “Tip Credit” legislation allows a tipped employee to be paid by their employer some amount
less than full minimum wage as long as their gratuities make up the difference between what they
are paid by their employer and the existing minimum wage requirement.
An example of typical Tip Credit legislation would be if minimum wage was $8.00 an hour,
and if state legislation allowed tips amounting to $2.00 an hour to be “credited” towards the $8.00 minimum wage amount,
then an employer would be required to pay the tipped employee a minimum wage of $6.00 an hour.
In this example, the $2.00 an hour of earned tips would be considered a “Tip Credit” towards the $8.00 an hour minimum wage requirement.
The Tip Credit amendments (Senate File 1147/House File 1225) being proposed at the Minnesota State Capital
requires that ALL tipped employees earn $12 an hour (wages and tips) before any Tip Credits could
be taken by an employer. This “$12 an hour guarantee” amendment (before Tip Credit could be invoked)
addresses any potential concerns for out state tipped restaurant employees working in smaller or less busy establishments.
Both of the above referenced amendments would keep the employer paid wage at the current minimum wage
amount of $7.25 an hour as long as the tipped employee earned an average of at least $12 per hour worked.