Indiana's $2.13 Tipped Wage with Full Tip Makeup
Indiana adheres to the federal standard for tipped employees, allowing employers to pay a direct cash wage of $2.13 per hour. This is permissible only if the employee's tips, when combined with the direct wage, meet or exceed the federal minimum wage of $7.25 per hour. Should tips fall short, the employer must make up the difference, ensuring no tipped employee earns less than $7.25/hour for all hours worked.
Indiana Tipped Wage + Tip Makeup
Ensures tipped employees earn at least the federal minimum wage through a combination of direct wages and tips, with employer makeup if tips are insufficient.
What these rules do as an Indiana shift is created.
Teambridge automatically applies Indiana's tipped wage rules at the moment a shift is created or edited. This ensures real-time compliance checks and adjustments, preventing violations before they occur.
Blocks sub-minimum direct wages
If an employer attempts to set a direct hourly wage below $2.13 for a tipped employee in Indiana, Teambridge will flag this and prevent the shift from being saved until corrected. This ensures the statutory minimum cash wage is always met.
Flags potential tip credit violations
For tipped employees, if the projected tips for a pay period, combined with the $2.13 direct wage, do not reach the $7.25 federal minimum wage, Teambridge will issue an alert. This proactive flagging allows employers to make necessary adjustments or plan for tip makeup payments.
Automates tip makeup calculations
At the close of a pay period, if a tipped employee's average hourly earnings (direct wage + actual tips) fall below $7.25, Teambridge automatically calculates the required tip makeup. This amount is then added to the employee's gross pay, ensuring full compliance without manual intervention.
Deploy Indiana Tipped Wage compliance for your business.
Stop worrying about manual calculations and stay compliant with Indiana's complex wage and hour laws, on autopilot.
Indiana's Tipped Wage and Tip Makeup Requirements
Indiana follows the federal Fair Labor Standards Act (FLSA) regarding tipped employees. Employers may take a tip credit against the federal minimum wage of $7.25 per hour, allowing a direct cash wage of $2.13 per hour. The difference, $5.12 per hour, is the maximum tip credit an employer can claim.
29 U.S.C. § 203(m) - FLSA Section 3(m)
"'Wage' paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees: Provided, That in determining the wage of a tipped employee, the amount paid such employee by an employer shall be deemed to be increased on account of tips by an amount determined by the employer, but not by an amount in excess of (1) the value of the tips actually received by the employee, nor (2) an amount equal to the difference between the minimum wage required to be paid under section 206(a)(1) of this title and the wage paid to such employee by the employer, except that the amount of the increase on account of tips determined by the employer shall not exceed $5.12 per hour."
Direct Cash Wage and Tip Credit
For an employer to utilize the tip credit, they must pay a direct cash wage of at least $2.13 per hour. The employer must inform the employee of the cash wage amount, the amount of the tip credit being taken, that all tips received by the employee must be retained by the employee (except for valid tip pooling arrangements), and that the tip credit cannot be taken unless the employee has been informed of these provisions. If an employee's tips combined with the direct cash wage do not equal at least the federal minimum wage of $7.25 per hour, the employer is legally obligated to make up the difference.
Tip Threshold and Employee Notification
An employee is classified as "tipped" if they customarily and regularly receive more than $30 per month in tips. Employers must ensure that employees are aware of the tipped wage provisions, including the direct wage, the maximum tip credit, and the requirement for tips to be retained by the employee (or properly pooled). Failure to properly notify employees invalidates the employer's ability to take the tip credit, meaning the employer would be required to pay the full federal minimum wage of $7.25 per hour directly to the employee, in addition to any tips received by the employee.
Tipped Wage compliance, automatically enforced by Teambridge.
Teambridge integrates Indiana's tipped wage laws directly into your payroll and scheduling workflows. From shift creation to payroll processing, every step is checked against the latest regulations, freeing you from manual oversight.
Real-time direct wage validation
When a manager schedules a tipped employee, Teambridge automatically verifies that the direct hourly wage meets or exceeds $2.13. Any attempt to set a lower wage is immediately flagged and prevented, ensuring foundational compliance.
Continuous tip credit monitoring
Teambridge tracks reported tips for each employee. Throughout the pay period, it continuously calculates the average hourly earnings (direct wage + tips) and alerts managers if an employee's earnings are trending below the $7.25 federal minimum, allowing for proactive adjustments.
Automated tip makeup calculation
At the end of each pay period, if a tipped employee's actual average hourly earnings fall short of $7.25, Teambridge automatically calculates the precise tip makeup amount required. This sum is then seamlessly added to the employee's gross pay for that period, ensuring full compliance without manual intervention.
Maintain audit-ready records
All tip credit calculations, tip makeup payments, and employee notifications are automatically documented and stored by Teambridge. This creates an unalterable audit trail, simplifying compliance checks and providing robust defense in case of an audit or dispute.
People also ask.
What is the direct cash wage for tipped employees in Indiana?
In Indiana, employers must pay tipped employees a direct cash wage of at least $2.13 per hour. This rate is set by federal law, which Indiana follows.
What is the minimum total wage a tipped employee must earn in Indiana?
When an employee's direct cash wage ($2.13/hour) is combined with their tips, their total earnings must meet or exceed the federal minimum wage of $7.25 per hour for all hours worked.
What happens if a tipped employee's tips don't reach the minimum wage?
If an employee's tips, when added to their $2.13 direct wage, do not reach $7.25 per hour, the employer is legally obligated to make up the difference. This is known as a "tip makeup" payment.
What is the tip threshold for classifying an employee as "tipped" in Indiana?
An employee is considered "tipped" if they customarily and regularly receive more than $30 per month in tips. This federal standard is also applied in Indiana.
Does Indiana allow tip pooling or tip sharing?
Indiana follows federal FLSA guidelines regarding tip pooling. A valid tip pool can include only employees who customarily and regularly receive tips, such as servers, bussers, and bartenders. Employers and managers cannot participate in the tip pool.
What are the employer notification requirements for taking a tip credit?
Before an employer can take a tip credit, they must inform the employee of the direct cash wage, the amount of the tip credit being taken, that all tips must be retained by the employee (except for valid tip pooling), and that the purpose of the tip credit is to ensure the employee's total earnings meet the minimum wage.