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 Illinois.
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 Illinois base their entire pay on tips and rely on them to cover their living expenses and lifestyle.
So, What is a Tipped Illinois Employee?
A tipped worker in Illinois is somebody who earns their wages through tips rather than a fixed salary or higher hourly rate that meets or exceeds the minimum wage in the state. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.
In Illinois, if an employee receives more than $20 or more 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 more. The laws surrounding the definition of an Illinois tipped employee follow the federal guidelines.
Tipped Employees and the Illinois Tipped Minimum Wage
To comply with Illinois minimum wage laws, employers must ensure that when including tips, their employees that are 18 years of age or older are being paid at the very least the state minimum wage rate set for Illinois tipped workers, also known as the Illinois 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 which is 60% of the regular minimum wage of $12.00 per hour.
There are many factors that contribute to the employment law in Illinois that will impact how employers handle tipped employees. Understanding the standard minimum wage in Illinois, 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 Illinois for 2022 is $7.20 per hour. The current minimum wage in Illinois in 2022 for those over the age of 18 years old is $12.00 per hour for non-tipped employees. If an employee works more than 40-hours per week then they are entitled to be paid overtime. This is called “time and a half pay” and is equal to one and a half times (1.5) an employee’s normal hourly wage.
Illinois law requires the Illinois Fair Labor Standards Division 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 Illinois 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 Illinois’ minimum wage rate being higher than the federal minimum wage rate, the state laws supersede the federal regulations.
Tip Credits and the Minimum Cash Wage in Illinois
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 Illinois tip credit is currently $4.80 per hour (40% of the applicable minimum wage) – this means that employers can claim a $4.80 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $12.00 minimum wage into a $7.20 per hour minimum wage (60%) that employers must pay to tipped employees no matter how much they earn.
Let’s assume a tipped employee earned less than $7.20 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 $12.00 per hour – up to 60% of the regular minimum wage.
A minimum cash wage ensures that tipped employees earn a wage, even if a slow workweek or other downturn occurs and they do not receive sufficient tips in a certain week or time period. This minimum wage rate ensures that servers and others in tipped roles in Illinois that do not make enough with tips can still earn a weekly wage when working full-time of $480 ($12.00 x 40 hours). The table below displays the Illinois tipped minimum wage history.
| State | Tipped Wage | Tip Credit | Year |
|---|---|---|---|
| Illinois tipped minimum wage 2022 | $7.20 | $4.80 | 2022 |
| Illinois tipped minimum wage 2021 | $6.60 | $4.40 | 2021 |
| Illinois tipped minimum wage 2020 | $6.00 | $4.00 | 2020 |
| Illinois tipped minimum wage 2019 | $4.95 | $3.30 | 2019 |
How Does This Affect My Business?
If you are planning to start (or purchase) a new business in Illinois due to the ever-growing opportunities presented by the state or simply considering Illinois as a place to live and work due to the abundantly tremendous quality of life on offer, 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 Illinois, much the same as most other U.S. states, tipped jobs and the industries surrounding them are very important to the state’s economy. Today there are just over 25,000 eating and drinking establishments in Illinois, and there are more than 588,000 restaurant and food service jobs in the state, which is impressive when you consider the small size of the state.
To learn more about the laws surrounding tipped employees from an employer and an employee perspective, you can contact the Illinois Department of Labor. 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:
Illinois Department of Labor
Michael A. Bilandic Building
160 N. LaSalle – 13th Floor
Chicago, IL 60601
Telephone: 312-793-2800
Other important phone numbers:
Minimum Wage/Overtime Information: (312) 793-2804
Minimum Wage Toll Free Hotline: (800) 478-3998
Sub-Minimum Wage & Sheltered Workshop Information: (312) 793-2804
