Tip Laws Guide & Resources

The federal tipped minimum wage is $2.13 per hour as of 2025. Employers must ensure tips bring total pay to at least the federal minimum wage of $7.25. Keep in mind that many states (or cities) may set higher tipped rates, which take precedence.

A tipped employee is someone who regularly receives tips as part of their compensation. This typically includes servers, bartenders, baristas, bussers, and some delivery staff. Federal and state laws may provide additional guidance for specific roles––be sure to check your state-sepcific guide above.

No, employers are not required to pay out tips—tips come from customers. Restaurants can choose to set up systems that encourage tipping, which can help tipped employees reach the minimum wage, or they can opt out of tip-based pay entirely.

However, employers must always ensure that tipped employees earn at least the applicable minimum wage. If an employee’s tips don’t bring their total pay up to the federal, state, or local minimum wage, the employer is legally required to make up the difference.

7shifts offers robust tip management tools to help restaurants stay compliant with federal, state, and local tip laws. Key features include:

Automated tip pooling and calculation:OS or time clock data, reducing errors with manual processes.

Tip credit & shortage reporting: Track tip credits and identify tip shortages when tips plus base pay don’t meet the required minimum wage, so employers know exactly what they need to cover.

Accurate tip payouts & record keeping:</b Distribute tips digitally (no cash required) and maintain clear records with a tip management dashboard, making reporting and audits easier.

Payroll integration:ting and deductions.

These features reduce manual errors, simplify complex calculations, and provide the documentation restaurants need to stay compliant with tip and wage laws.