Servers often make a direct wage of $2.13 per hour because this is the federal minimum cash wage for tipped employees in the United States. This rate is allowed under federal labor law, provided that the employee's tips, when combined with the direct wage, bring their total hourly earnings up to at least the federal minimum wage of $7.25 per hour.
Understanding the Tipped Minimum Wage
The $2.13 per hour wage for servers is part of a system known as the "tip credit." This system recognizes that employees in certain occupations, such as servers, customarily and regularly receive a significant portion of their income from customer tips.
Key aspects of the tipped minimum wage include:
- Definition of a Tipped Employee: An employee is considered "tipped" if they customarily and regularly receive more than $30 per month in tips.
- Employer's Obligation: An employer is only required to pay the direct wage of $2.13 per hour if that amount, combined with the tips received by the employee, at least equals the federal minimum wage.
- Tip Credit: The difference between the direct wage ($2.13) and the federal minimum wage ($7.25) is known as the "tip credit." This credit, currently up to $5.12 per hour, is the amount of tips an employer can count towards meeting their minimum wage obligation.
- "Top-Up" Rule: If an employee's tips, combined with the $2.13 direct wage, do not reach the federal minimum wage of $7.25 per hour, the employer is legally required to make up the difference. This ensures that no tipped employee earns less than the full federal minimum wage per hour when tips are factored in.
How the Calculation Works
Here's a simple breakdown of how a server's hourly earnings are expected to meet the federal minimum wage:
| Component | Federal Standard |
|---|---|
| Required Direct Wage | $2.13 per hour |
| Maximum Tip Credit | $5.12 per hour |
| Federal Minimum Wage | $7.25 per hour |
- The employer pays the $2.13 direct wage.
- The server earns tips from customers.
- If the sum of $2.13 and the tips is less than $7.25, the employer must pay the additional amount to ensure the server reaches at least $7.25 per hour.
State Variations and Higher Wages
It's important to note that while $2.13 is the federal minimum direct wage for tipped employees, many states and even some cities have their own laws that require a higher direct wage for tipped workers or even mandate that employers pay the full state minimum wage before tips.
For example:
- Some states require employers to pay a higher direct cash wage than $2.13 (e.g., California requires the full state minimum wage for tipped employees before tips).
- Other states have a higher overall minimum wage than the federal $7.25, meaning the total of tips plus direct wage must meet that higher state standard.
Servers typically rely heavily on tips to make a living wage, as the direct hourly wage is quite low. The legal framework is designed to ensure that their total earnings, including tips, do not fall below the federal minimum wage, or the applicable state or local minimum wage if it is higher.
