Payroll for tipped staff

• The federal tip credit lets you pay $2.13/hr cash wage if tips bring pay to at least $7.25/hr. Many states set higher minimums.
• Tips count as wages for FICA. Employees must report tips of $20 or more a month to you.
• Managers and owners can't take from the tip pool.

Try the tip pooling calculator.

Sources: DOL Fact Sheet #15, IRS tip reporting.

Updated Nov 2, 2026.