What are Tipped Employees?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 20 October 2019
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Tipped employees are employees who regularly receive tips as part of their work. A classic example of a tipped employee is a server at a restaurant in the United States. Servers are usually tipped by patrons. Other service professionals such as hairdressers, porters, chambermaids, and bellhops are commonly classified as tipped employees. Many nations define a tipped employee as anyone who receives more than an amount such as $30 United States Dollars (USD) in tips every month.

Under the law, tipped employees may be treated differently than other employees. Because tips are perceived to be part of their compensation, sometimes minimum wage laws for tipped employees are different. Their minimum wages are calculated on the assumption that they earn money from tips which makes up the difference if they are paid less than regular employees. This calculation is based on reporting of tips from tipped employees. The government sets a maximum tip credit, an amount which can be counted against minimum wage, to determine the minimum wage for tipped employees.

In addition, tipped employees are usually required to report their tips to their employers. In some cases this is done automatically, as in establishments with tip pools which are collected over the course of the evening and then distributed to the staff members on their paychecks, at the end of the shift, or at other intervals. Tips are counted as part of employee income for tax purposes.


Someone who is classified as a tipped employee should have access to legal notices providing information about the rights and responsibilities of such employees. This includes a disclosure of minimum wage information, limits on working hours, and other protections put in place by law to prevent exploitation of tipped employees and other workers. Likewise, it includes a discussion of the tax issues which surround tips, and other responsibilities which such employees may have.

The practice of tipping is not universal and social norms about tipping vary considerably. Travelers may want to remember that even if they are from a country where tipping is not conventional, in nations where tips are common, tipped employees commonly have a very low minimum wage and rely on their tips for survival. Some critics have suggested that this allows establishments to transfer the responsibility for paying their employees to customers, which is not entirely fair, but the end result is that employees may be resentful when they are not tipped or are tipped at an unusually low percentage.


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Post 3

Most people forget that the federal minimum wage for tipped employees is lower than regular employees. They think that the tip is something extra that doesn't have to be given, but that's not true. Tipped employees have a right to that tip. Anyone who's worked as a server at a restaurant will know how terrible it is to not be given tip.

Tip is also meant to be an incentive for the employee to do their job better because the better they work, the more tip they will receive. But some people are stingy and no matter how well someone works, they don't like to leave much tip. If only they put themselves in the shoes of that tipped employee!

Post 2
@fBoyle-- It's customary to do so, yes. And usually the tip is determined by the tipping rates in that area. Not every state and city has the same tipping rates, it depends from area to area. It's a good idea to ask someone who is from there about what tipping percentage is the norm in the area.

I once gave a taxi driver very little tip because I was short on change and didn't want to give a large bill. But I felt very bad about it afterward. I always take tip into account before I take a taxi now.

Post 1

Do I have to tip a taxi driver?

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