Illinois tipped workers earn $9.00 cash + up to 40% tip credit. Chicago is phasing it out.
Illinois allows a tip credit of up to 40% — narrower than the federal 70% credit. Tipped workers earn $9.00/hr cash with tips closing the gap to $15.00/hr. Chicago is on a different path: the One Fair Wage Ordinance is eliminating the tip credit by 2028. As of July 1, 2025 the Chicago credit dropped to 24%; by 2028 Chicago tipped workers will earn the full minimum in cash.
Tipped Wage Reconciliation with Chicago Phase-Out
Calculates whether each tipped worker's cash wage plus tips reaches the applicable minimum. Auto-adds make-up pay if short. Tracks Chicago's diminishing tip credit through 2028.
What those rules do when tips don't reach the floor.
The hero card configuration: Critical on shortfalls, Flag on the make-up line, Block on illegal tip-pool composition.
When a tipped worker's cash wage plus declared tips falls below the applicable minimum (state $15, Chicago $16.60+) for the workweek, payroll close surfaces a Critical indicator with the exact dollar shortfall.
The reconciling amount auto-adds to the timesheet as a separate Flag-tagged line: "Tip credit make-up." Payroll runs the line at full minimum without manual input.
Federal law (and IL/Chicago adoption) prohibits managers and supervisors from participating in tip pools. When an admin tries to add a manager-tagged worker to a tip pool, the action is blocked.
Deploy tip reconciliation in your Teambridge.
Tell us about your tipped Illinois workforce. We'll spin up tip-credit reconciliation across IL state, Chicago (with phase-out tracking), and 21 other Illinois policies in a sandbox tenant.
Two phase-outs running in parallel.
Illinois state policy is steady — 40% credit, $9 cash. Chicago policy is changing every July 1 from 2025 through 2028 until the credit hits zero. Both must be modeled and enforced separately.
Illinois state structure
Illinois Minimum Wage Law § 4(c) caps the tip credit at 40% of the standard minimum. With the standard at $15.00, the cash wage minimum is $9.00 — substantially higher than the federal $2.13. If a tipped worker's cash + tips falls below $15.00 for the workweek, the employer pays the difference.
Chicago's phase-out timeline
The 2023 One Fair Wage Ordinance reduces the maximum tip credit each July 1: 24% (2025), 16% (2026), 8% (2027), 0% (2028). Cash wages rise correspondingly: $12.62 (2025) → $13.94 (2026 estimated) → ~$15.27 (2027) → full minimum (2028). Each annual change requires schedule updates.
Teambridge reconciles every tipped worker, every workweek, every jurisdiction.
Two-jurisdiction tip-credit math is the kind of calculation that compounds errors fast. Teambridge handles the routing and the math.
Real-time tip totals per shift.
Tipped workers declare tips through the worker app at end of shift. The total combines with cash wage to compute the effective hourly rate for the workweek.
Chicago vs. rest of IL.
At workweek end, Teambridge applies the right floor: $15.00 IL or $16.60+ Chicago. Cash + declared tips must reach that floor for total hours worked.
Reconciling line added to paycheck.
Teambridge adds a 'Tip credit make-up' line to the timesheet equal to the shortfall. Payroll processes it as standard wages on the regular paycheck.
Chicago credit changes encoded.
Each July 1 from 2025-2028, Chicago's maximum tip credit drops. The new cash wage applies automatically to all Chicago tipped workers from that date forward.
Still evaluating? Get a free Illinois compliance audit.
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