Paying tips is not that common in many countries around the world. However, it is extremely common practice in the United States, with a huge number of workers making the majority of their income through tips. This is certainly the story with tipped workers in Tennessee.
Hospitality workers, including restaurant, bar, cafe, hotel, cruise, bellhop, and other service provider employees usually are aware that they will be paid a small hourly wage, which is heavily supplemented through the addition of tips paid by customers.
The majority of service-industry workers who are paid Tennessee tipped minimum wage will base most of their take-home pay on tips and will rely on them to cover the cost of living and other potential expenses. Currently, the Tennessee tipped minimum wage is $2.13 per hour, and the tip credit is $5.12 per hour. For non-tipped employees it is $7.25 per hour.
What makes a Tipped Employee?
When you consider what makes a tipped employee, a tipped employee is somebody who earns their wages through tips rather than a fixed salary or higher hourly rate. Federal law has established the rules behind what is considered to be a tipped employee vs. a non-tipped employee.
In Tennessee, if an employee receives any amount of money per month in tips, they are considered to be a tipped employee by federal and state standards. These employees often include workers such as bartenders, restaurant servers, hotel workers, and other service and hospitality-related industries. The Tennessee laws that surround the definition of a tipped employee follow these guidelines.
Tennessee Minimum Wage for Tipped Employees
To abide by the Tennessee minimum wage laws, employers must ensure that their employees are being paid at the very least the state minimum wage rate (federal minimum wage) when you include tips, which is also known as Tennessee tipped minimum wage for employees.
If these employees do not make the minimum wage pay rate in tips, then it is the full responsibility of the employer to make up the difference, ensuring that the employee is being paid the full minimum wage rate for Tennessee.
There are several different employment law factors that have a direct impact on how Tennessee employers handle their tipped employees. Knowledge of the minimum wage in Tennessee, the federal laws controlling wages, and how pay and wages work for tipped employees is pivotal if you are already running or considering starting a service-related business with tipped employees.
Currently, the minimum wage in Tennessee is $7.25 per hour (federal minimum wage) for non-tipped employees. Tennessee’s tipped minimum wage is $2.13 per hour, and per the graphic, it has not changed in several years. Tennessee currently follows the federal minimum wage laws meaning that there is no specific and higher minimum wage set by the state itself, employees and employers must follow federal guidelines related to the minimum wage.
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 employers.
Federal law requires that Tennessee 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.
Tip Credits and the Minimum Cash Wage in Tennessee
Since the rules for tipped employees are different than non-tipped employees, there are other ways that Tennessee employers can calculate the minimum amount earned by a tipped employee. One of these ways, and perhaps the most significant method is through tip credits.
So, what is the minimum wage for a Bartender in Tennessee? The Tennessee tip credit is currently $5.12 per hour – this means that employers can claim a $5.12 hourly credit against the tipped employee’s minimum wage. This credit effectively turns the $7.25 minimum wage into a $2.13 per hour minimum wage that employers must pay to tipped employees no matter how much they earn.
Let’s assume a tipped employee in Tennessee earns less than $5.12 per hour across a working week as their tipped wage. In that case, the employer must pay the difference between the minimum cash wage ($2.13 per hour) what they made in tips per hour in a working week and the total of $7.25 per hour. This is tipped credit against the minimum wage and it can be up to 71% or $5.12.
A minimum cash wage ensures that tipped employees earn a reasonably consistent wage even if a slow workweek or other downturn occurs where they do not receive sufficient tips. This regular minimum wage rate ensures that Tennessee servers and others in tipped roles in Tennessee that do not make enough with tips can still earn a minimum weekly wage when working full-time of $290 ($7.25 x40 hours per week). The table below displays the tipped minimum wage history in Tennessee.
|State||Tipped Wage||Tip Credit||Year|
|Tennessee tipped minimum wage 2022||$2.13||$5.12||2022|
|Tennessee tipped minimum wage 2021||$2.13||$5.12||2021|
|Tennessee tipped minimum wage 2020||$2.13||$5.12||2020|
|Tennessee tipped minimum wage 2019||$2.13||$5.12||2019|
What Does This Mean for My Business?
If you are planning to buy or start a new business in Tennessee due to the small business opportunities the state has to offer, or just simply considering moving to and finding a job in Tennessee, you will need to be aware of the details surrounding the tipped minimum wage in the Volunteer State.
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, and will certainly aid you in making an informed decision whether or not to start a business in Tennessee that has tipped employees.
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.
In Tennessee, much the same as most other U.S. states tipped jobs and the industries surrounding them are crucial to the state’s economy. Today there are just over 10,500 full-service eating establishments in Tennessee!
If you have a claim related to employment, you can find out more information on the Tennessee Department of Labor and Workforce Development website. You can also file a complaint if you feel you are not being paid the correct minimum wage or overtime rate.
To file a complaint, call this number: +1 844-224-5818