United States · Payroll
Tip credit and overtime.
Enter hours, cash wage and tips for one workweek. See the tip credit used, overtime owed and any shortfall the employer must make up.
At the federal $7.25 minimum and $2.13 cash wage, the maximum tip credit is $5.12 an hour. If tips fall short of the credit, the employer pays the difference. Overtime is figured on the full minimum wage, so 45 hours with $300 in tips means $113.98 in employer cash wages.
Your workweek
Weekly result
Worked example
A server works 45 hours at a $2.13 cash wage with a $7.25 minimum and receives $300 in tips. The maximum credit is $7.25 − $2.13 = $5.12 an hour, or $230.40 over 45 hours; tips of $300 cover it, so no shortfall. Cash wages are $2.13 × 45 = $95.85. The regular rate is $7.25, so the 5 overtime hours add 0.5 × $7.25 × 5 = $18.13. Employer cash wages are $113.98, and with tips the gross is $413.98. Check: $113.98 + $230.40 credit = $344.38, which equals 40 × $7.25 + 5 × $10.875.
Formula notes
- Maximum credit per hour = minimum wage − cash wage (cash wage at least $2.13). It cannot exceed tips actually received (29 CFR 531.59).
- Shortfall = maximum credit total − tips counted as credit. The employer pays it in cash.
- Regular rate = cash wage + credit taken per hour, which reaches the full minimum wage when the credit is fully used or the shortfall is paid (29 CFR 531.60).
- Overtime premium = 0.5 × regular rate × hours over 40.
- Employer cash wages = cash wage × hours + shortfall + overtime premium. Gross with tips adds all tips.
Official sources (verified September 30, 2026): https://www.law.cornell.edu/uscode/text/29/206 (29 U.S.C. 206, $7.25), https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-B/part-531/subpart-D/section-531.59, https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-B/part-531/subpart-D/section-531.60, https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-B/part-531/subpart-D/section-531.56. Also see https://www.dol.gov/agencies/whd/fact-sheets/15-flsa-tipped-employees, the DOL Fact Sheet #15, which refused automated access when this page was built; no figure here relies on it. State minimums and rules are your input and are not looked up. Employer notice and tip-pooling conditions for taking the credit are not checked.
Frequently asked questions
Is $2.13 an hour legal everywhere?
Only where the state minimum cash wage is not higher. $2.13 is the federal floor; many states require a higher cash wage or ban the tip credit entirely. Enter your state's numbers in the calculator.
What if tips are lower than the tip credit?
Under 29 CFR 531.59 the employer must pay the balance so cash wages plus the credit reach the minimum wage. The calculator shows that as the shortfall, per workweek.
How is overtime figured for a tipped worker?
Under 29 CFR 531.60 the regular rate includes the cash wage plus the tip credit taken, so for a full credit it equals the full minimum wage. Each overtime hour adds half of that rate on top of the cash wage already counted for every hour. Tips beyond the credit are left out of the regular rate.
Do tips count as gross pay?
Tips are the employee's, not the employer's pay, so the calculator reports employer cash wages separately and then a gross figure that adds the tips. Tips are generally taxable income; this tool does not compute tax.
Who counts as a tipped employee?
Someone in an occupation where tips customarily and regularly total more than $30 a month (29 CFR 531.56). Hours in a separate non-tipped job do not get the tip credit.
Not tax or legal advice
This is an educational estimate for one workweek. State and local laws, employer notice requirements, tip pooling, dual jobs and taxes can change the result. Confirm with your state labor department or the U.S. Department of Labor.