Employment laws, and particularly minimum wage laws in the United States are not clear or straightforward to follow, especially when you are looking at the tipped minimum wage, and tipped employees in Colorado.
Workers at restaurants, bars, hotels, cruise ships, and other service providers often expect to be paid a relatively small hourly wage supplemented heavily by tips (gratuities). Many service-industry workers in Colorado base their entire pay on tips and rely on them to cover their living expenses and lifestyle.
So, What is a Tipped Colorado Employee?
A tipped Colorado worker is someone who earns their wages through tips rather than a fixed salary or higher hourly rate that exceeds the minimum wage in the state. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.
For Colorado, if an employee receives more than $30 per month in tips, they are considered to be a tipped employee by federal standards. These employees often include workers such as bartenders, servers in restaurants, some hotel workers (like bellhops and porters), valet car parking attendants, and others. The Colorado laws surrounding the definition of a tipped employee follow the federal guidelines.
Tipped Employees and the Colorado Tipped Minimum Wage
To comply with Colorado minimum wage laws, employers must ensure that when including tips, their employees are being paid at the very least the state minimum wage rate set for Colorado tipped workers, also known as the Colorado tipped minimum wage for employees. If those employees are not making that minimum pay rate, it is then the employer’s responsibility to make up the difference.
There are many factors that contribute to the employment law in Colorado that will impact how employers handle tipped employees. Understanding the regular minimum wage in Colorado, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal if you are considering starting a service-related business with tipped employees.
The tipped minimum wage in Colorado for 2022 is $9.54 per hour. The current minimum wage in Colorado in 2022 is $12.56 per hour for non-tipped employees. Colorado law requires the Colorado Department of Labor and Employment to calculate a minimum wage increase each year. The annual calculation is based on the percentage increase in the state’s Consumer Price Index (CPI) previous 12-month period from when the calculation occurs.
Fair Labor Standards Act (FLSA) and Tipped Employees
The Federal Fair Labor Standards Act, also known as the FLSA, is a federal law from the U.S. Department of Labor. This law establishes a national minimum wage, defines classifications for employees, and covers other essential standards and requirements for Colorado employers.
Federal law requires that employers make tipped employees aware of the cash wage paid. They must also let them know about the tip credit, and explain any tip pooling systems at the workplace. Currently, the national direct hourly salary is only $2.13 per hour.
Due to Colorado’s minimum wage rate being higher than the federal minimum wage rate, the state laws supersede the federal regulations.
Tipped Employees, Tip Credits, and other Considerations for Employers in Colorado
Since the rules for tipped employees are different than non-tipped employees, there are other ways that employers can calculate the minimum amount earned by a tipped employee. One of these ways is through tip credits.
The Colorado tip credit is currently $3.02 per hour – this means that employers can claim a $3.02 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $12.56 minimum wage into a $9.54 per hour minimum wage that employers must pay to tipped employees no matter how much they earn.
Let’s assume a tipped employee earned less than $9.54 per hour as their tipped wage (the minimum cash wage). In that case, the employer must pay the difference between what they made and the total $12.56 per hour.
A minimum cash wage ensures that tipped employees earn a wage, even if a slow workweek or other downturn occurs and they cannot receive sufficient tips in a certain week or time period. This minimum wage rate ensures that servers and others in tipped roles in Colorado that do not make enough with tips can still earn a weekly wage when working full-time of $502.24 ($12.56 x 40 hours). The table below displays the Colorado tipped minimum wage history rates.
|State||Tipped Wage||Tip Credit||Year|
|Colorado tipped minimum wage 2022||$9.54||$3.02||2022|
|Colorado tipped minimum wage 2021||$9.30||$3.02||2021|
|Colorado tipped minimum wage 2020||$8.96||$3.04||2020|
|Colorado tipped minimum wage 2019||$8.08||$3.02||2019|
How Does This Affect My Business?
If you are planning to start (or purchase) a new business in Colorado due to the awesome opportunities the state has to offer or simply considering Colorado as a place to live and work due to the abundance of natural beauty within the state, you should certainly take this information about tipped employees and the state minimum wage into account.
While you may want to speak with an employment attorney or accounting firm for legal and tax advice about your business, understanding the minimum wage laws for tipped employees can help you make an informed decision whether or not the state is right for you and your future plans.
In Colorado, much the same as most other U.S. states, tipped jobs are a mainstay of the economy and accessible for those seeking employment given the tourism-heavy nature of the Colorado economy thanks to the state’s booming ski industry. Today there are just over 12,000 eating and drinking establishments in Colorado, and there are more than 285,000 restaurant and food service jobs in the state.
To learn more about the laws surrounding tipped employees from an employer and an employee perspective, you can contact the Colorado Department of Labor & Employment. You can also file a complaint if you feel you are not being paid the correct minimum wage or overtime rate. Here are the contact details:
Colorado Department of Labor and Employment
633 17th Street, Suite 201
Denver, CO 80202-3660