The Tip Credit: Why it exists

Posted 4.23.2018

The Tip Credit: Why it exists

Historically in the United States servers have received tips from customers for the service and hospitality that they provide. At the same time, restaurant owners invest in their businesses to create the best possible experience for customers that enables servers to earn more in tips. Recognizing the unique business model of table service restaurants, decades ago Congress created the tip credit system and its safeguards for employees. Under this system, tipped employees are guaranteed at least the minimum wage but are offered the potential to make significantly more. The tip credit exists in 43 states across the country and no state has eliminated the tip credit in over a decade. When there were recent attempts to eliminate the tip credit in Maine, Michigan, and the District of Columbia, lawmakers quickly to action to listen to tipped workers and to protect the existing tip credit.
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