Washington is one of the few states that don’t allow tip credits, which means your tipped employees earn the full state minimum wage before tips even enter the picture. If you’re used to federal rules or coming from another state, that’s a significant shift in how you handle payroll.
This guide covers everything Washington restaurant employers need to know about tip ownership, tip pooling rules, service charge requirements, and record-keeping to stay compliant.
Can employers take a tip credit in Washington?
Washington state law requires employers to pay tipped employees the full state minimum wage before tips. Tips and gratuities belong entirely to the employees who earn them, and employers can’t take tips for company use or apply them toward wages. Tip pooling is allowed under specific rules, but managers, supervisors, and owners generally can’t participate in tip pools or take employees’ tips, though they may keep tips that are given directly to them for services they personally provide.
If you’re coming from another state, this is a significant difference. Under federal law, many states allow employers to pay tipped workers as little as $2.13 per hour and let tips make up the difference to reach minimum wage. That practice is called a “tip credit.”
Washington doesn’t allow tip credits at all. Your servers, bartenders, and bussers get the full minimum wage as their base pay, and tips are extra compensation on top of that wage. This applies whether your restaurant is in Seattle, Spokane, or anywhere else in the state.
Minimum wage requirements for tipped employees in Washington
Every tipped employee in Washington earns the same minimum wage as any other worker. There’s no separate “tipped minimum wage” like you’ll find under federal rules.
Washington state minimum wage for tipped workers
The state minimum wage ($17.13) applies to all employees, regardless of whether they receive tips. You pay the full rate before tips enter the picture. Some cities and counties have higher local minimum wages, so be sure to follow the rate that applies where your business operates.
(Note: Verify the current minimum wage rate with the Washington State Department of Labor & Industries before processing payroll, as rates adjust annually.)
Seattle minimum wage and the tip credit ban
Seattle has its own minimum wage ($21.30), which is higher than the state rate. If you operate within Seattle city limits, you follow Seattle’s rules for employees’ hours worked within Seattle city limits.
As of January 1, 2025, Seattle prohibits tip credits entirely. There’s no exception for small employers or any other category. Tips belong to your staff.
(Note: Seattle allowed a temporary tip credit for businesses with 500 or fewer employees from 2015–2024, which expired December 31, 2024.)
2026 Tipping Playbook
Learn how to manage, distribute, and track tips fairly—while staying compliant and keeping your team’s trust.
What counts as tips and gratuities under Washington law
Not every extra charge on a bill qualifies as a tip. Washington’s rules only apply to amounts that meet specific criteria.
- Tips: Voluntary amounts left by customers. The customer decides whether to leave one and how much.
- Gratuities: Same thing as tips. Washington law uses the terms interchangeably.
- Service charges: Different from tips. Service charges are typically mandatory amounts added by the restaurant, not voluntary customer decisions.
The key distinction is that tips are voluntary. If the customer has no choice in the matter, it’s not a tip under Washington law.
Tip pooling rules for Washington restaurants
Tip pooling is legal in Washington, and many restaurants use it to distribute tips more evenly across the team. However, the rules about who can participate are strict, and violations can get expensive.
Who can participate in a tip pool
Eligible employees typically include servers, bartenders, bussers, food runners, hosts, and back-of-house staff like cooks and dishwashers. You can include back-of-house employees in your tip pool, which gives you flexibility in how you structure tip sharing.
Employees excluded from tip pools
Salaried-exempt managers, supervisors, and business owners cannot participate in tip pools. However, non-exempt hourly lead workers may be included in tip pools.
Washington law bases this exclusion on whether someone is exempt from the Washington Minimum Wage Act under RCW 49.46.010(3)(c) — which comes down to whether they’re paid a salary and meet the exemption criteria, not simply whether they have a supervisory title or occasionally direct other employees.
Non-exempt hourly lead workers, on the other hand, can be included in your tip pool even if they handle some supervisory tasks like scheduling or directing workflow.
One more thing to keep in mind: managers, supervisors, and owners can’t participate in tip pools, but they can keep tips that customers give them directly for services they personally provide.
Voluntary tip sharing vs mandatory tip pools
Both voluntary tip-outs and mandatory tip pools are legal in Washington.
- Voluntary tip sharing: An employee chooses to share tips with coworkers. It’s their decision.
- Mandatory tip pool: The employer requires participation. Everyone in the pool contributes and receives according to a set formula.
You can mandate a tip pool, but only if it follows the rules. Excluded parties like salaried-exempt managers, supervisors, and business owners can’t participate.
Service charges vs tips in Washington
Service charges and tips look similar on a receipt, but Washington law treats them very differently.
| Tips | Service charges | |
|---|---|---|
| Who decides the amount | Customer | Restaurant |
| Automatically added | No | Yes (e.g., large party fee) |
| Belongs to employee by default? | Yes | Depends on disclosure |
Disclosure requirements for service charges
If you add a mandatory service charge to a customer’s bill, like an automatic gratuity for parties of eight or more, you have to disclose how that money will be distributed. The disclosure has to be clear and in writing. Customers need to know before they pay whether the charge goes to staff or to the house.
Without proper disclosure, the full amount goes to the employees who provided the service.
How service charges are distributed to staff
You have two options:
- Pay the full service charge to employees. This is the simplest approach and requires no special disclosure.
- Retain some or all for the business. You can do this, but only if you clearly disclose it to customers on both the menu and the bill.
The disclosure can’t be buried in fine print. It has to be conspicuous, meaning customers need to actually see it.
Can employers deduct credit card processing fees from tips?
Yes, but with limits. Washington allows you to deduct the proportional credit card processing fee from tips paid by credit card. However, you can only deduct the prorated portion of the credit or debit card processing fee that is attributable to the tip—not the full transaction fee—and only the amount actually charged by your processor.
- What you can deduct: The actual processing percentage on the tipped portion of the bill. If your processor charges 2.5%, you can deduct 2.5% from credit card tips.
- What you can’t deduct: Any additional amount, flat fee, or administrative charge beyond the actual processing cost attributable to the tip.
Keep documentation of your processing rates. If an employee disputes a deduction, you’ll want records showing the exact fee you were charged.
Pending Legislation Alert: Keep an eye on House Bill 1623. If passed and funded this legislative session, it would prohibit employers from deducting credit card processing fees from employee tips beginning July 1, 2026. Until then, Washington L&I policy allowing proportional processing fee deductions remains in effect.
Gratuity tips payout timing and requirements
Washington requires that tips be paid out in full without unreasonable delay. You can’t hold them indefinitely or use them as a form of “security.”
- Cash tips: Typically paid out the same day or at the end of the shift.
- Credit card tips: Paid by the next regular payday following the pay period when they were earned.
- Tip pool distributions: Follow a consistent, documented schedule.
Tips belong to employees, and they’re entitled to receive them promptly.
Tip record-keeping requirements for Washington employers
Good documentation protects you and your employees. If there’s ever a dispute or an audit, you’ll want clear records.
Track the following:
- Individual tip amounts: What each employee receives per shift
- Tip pool calculations: How distributions are calculated and divided
- Service charge disclosures: Copies of written disclosures provided to customers
- Payout records: When and how tips and service charges were distributed
Keep records for at least three years. (Verify the exact retention requirement with Washington L&I for your specific situation.)
Payroll Implementation Checklist
Use this handy checklist so you don’t miss a thing.
Simplify Washington tip compliance for your restaurant
Tracking tips manually, especially with complex tip pools, eats up hours every week. Manual calculations also increase the risk of errors that lead to staff disputes and potential violations.
Tip management software can automate the math, track distributions, and maintain the detailed records Washington law requires. Instead of spreadsheets and calculators, you get accurate payouts and documentation that’s ready if you ever face an audit.
Spending too much time on tip calculations? Start a free trial of 7shifts to see how automated tip pooling can save you time and reduce errors.
FAQs about Washington tip laws
Can restaurant managers receive tips in Washington?
Washington law prohibits managers, supervisors, and owners from participating in tip pools or taking other employees’ tips. However, they may keep tips given directly to them for services they personally provide.
How long do Washington employers have to keep tip distribution records?
Keep all tip and wage records for at least three years. This protects you in case of a wage dispute or audit. (Confirm the exact retention period with Washington L&I for your specific circumstances.)
Are automatic gratuities on large parties considered tips or service charges in Washington?
Automatic gratuities are service charges, not tips. Because the customer doesn’t have a choice in the amount, it doesn’t meet the legal definition of a tip.
This means automatic gratuities are subject to the disclosure and distribution rules for service charges, not the rules for tips.
Rebecca Hebert, Sales Development Representative
Rebecca Hebert
Sales Development Representative
Rebecca Hebert is a former restaurant industry professional with nearly 20 years of hands-on experience leading teams in fast-paced hospitality environments. Rebecca brings that firsthand knowledge to the tech side of the industry, helping restaurants streamline their operations with purpose-built workforce management solutions. As an active contributor to expansion efforts, she’s passionate about empowering restaurateurs with tools that genuinely support their day-to-day operations.
