Saying that employment laws, and in particular minimum wage laws in the U.S. are not particularly clear or straightforward to follow would be a serious understatement, especially when it comes to the tipped minimum wage, and tipped employees.
Whilst tipping certainly isn’t the most common practice in other countries around the world, it certainly is in the United States, with many workers making their income through tips.
Hospitality workers, including restaurant, bar, cafe, and other service provider employees typically expect to be paid a small hourly wage, which is then complemented with the addition of tips (gratuities).
Most service-industry workers will base their entire salary on tips and rely on them to cover living expenses, and other general costs, which is why it is so important to understand what (as an employee) you are supposed to be paid or (as an employer) pay your employees.
So, What Makes a Tipped Employee?
Firstly, the question that is asked very frequently when discussing this topic, what makes a tipped employee? A tipped worker is someone who earns their wages through tips rather than a fixed salary or higher hourly rate. Federal law establishes the rules of what is considered a tipped employee vs. a non-tipped employee.
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, valet car parking attendants, and others. The Ohio laws surrounding the definition of a tipped employee follow the federal guidelines.
Tipped Employees and the Ohio Tipped Minimum Wage
To abide by the Ohio 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 Ohio tipped workers, also known as Ohio 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 Ohio that will impact how employers handle tipped employees. Understanding the regular minimum wage in Ohio, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal for minimum wage workers if you are considering starting a service-related business with tipped employees.
The current minimum wage in Ohio is $9.30 per hour for non-tipped employees. The tipped minimum wage is $4.65 per hour. Ohio law requires the Ohio Department of Commerce 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.
The CPI is calculated based on what consumers pay for goods, house price increases, and other significant financial factors. The minimum wage for both tipped and non-tipped employees rises based on the CPI. You can learn more about the Ohio minimum wage, and the factors that go into the annual increases on our minimum wage page.
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 Ohio employers.
Federal law requires that employers make tipped employees aware of the cash wage paid (currently, the national direct hourly salary is only $2.13 per hour), let them know about the tip credit, and explain any tip pooling systems at the workplace. Due to Ohio’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 Ohio
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 Ohio tip credit is currently $4.65 per hour – this means that employers can claim a $4.65 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $9.30 minimum wage into a $4.65 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 $4.65 per hour as their tipped wage. In that case, the employer must pay the difference between what they made and the total $9.30 per hour. This pay is called the minimum cash wage.
A minimum cash wage ensures that tipped employees earn a wage, even if a slow workweek or other downturns occurs and they cannot receive sufficient tips. This minimum wage rate ensures that servers and others in tipped roles in Ohio that do not make enough with tips can still earn a weekly wage when working full-time of $372 ($9.30 x 40 hours). The table below showcases the tipped minimum wage rates in Ohio over the past few years.
|State||Tipped Wage||Tip Credit||Year|
|Ohio tipped minimum wage 2022||$4.65||$4.65||2022|
|Ohio tipped minimum wage 2021||$4.40||$4.40||2021|
|Ohio tipped minimum wage 2020||$4.35||$4.35||2020|
|Ohio tipped minimum wage 2019||$4.27||$4.28||2019|
How Does This Affect My Business?
If you are planning to start (or purchase) a new business in Ohio due to the awesome opportunities the state has to offer or simply considering Ohio as a place to live and work, 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 Ohio, 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 Ohio economy in addition to the eating-out culture of the state. Today there are just over 22,000 eating and drinking establishments in Ohio, and there are almost an incredible 585,000 restaurant and food service jobs in the state.
Most U.S. states and territories require that tipped employees make either the full state minimum wage or make a minimum cash wage higher than the FLSA’s requirements. Regardless of where you locate your business in the U.S., you will most likely need to have a pay rate for tipped employees higher than the federal tipped employee rate.
To learn more about tipped employees, you can check out the Department of Labor’s Website on the minimum wage for tipped employees and other Ohio labor law.