Chicago Tipped Minimum Wage: Phase-Out, Overtime, and Tip Pooling

The Chicago tipped minimum wage is $12.62 per hour as of July 1, 2025, for employers with four or more employees.¹ That cash wage rises every July under the city’s One Fair Wage law, which shrinks the tip credit year by year until tipped workers earn the same base pay as everyone else in July 2028. Chicago’s rate is well above the Illinois state tipped minimum of $9.00 per hour, so if you work within city limits, the city rate controls.²

The full Chicago minimum wage is $16.60 per hour. Employers of tipped staff may take a tip credit of 24% of that figure, which equals $3.98 per hour, bringing the required cash wage to $12.62.¹ The credit only works when your tips actually fill the $3.98 gap for every hour you work. If they don’t, your employer owes the difference. Businesses with fewer than four workers follow the Illinois state minimum instead.

How the Tipped Rate Will Change Through 2028

Chicago is phasing out the tip credit entirely. Each July 1, the maximum credit drops by eight percentage points until it reaches zero in 2028.³

July 1, 2024: tip credit cut to 32%; tipped cash wage was $11.02.
July 1, 2025: tip credit at 24%; tipped cash wage is $12.62. This is the current rate.
July 1, 2026: tip credit drops to 16%.
July 1, 2027: tip credit drops to 8%.
July 1, 2028: tip credit eliminated. Tipped workers earn the full Chicago minimum wage.

The standard minimum wage also adjusts annually based on the Consumer Price Index, capped at a 2.5% increase per year.⁴ The 2026, 2027, and 2028 dollar figures will depend on each year’s CPI-adjusted rate. Either way, your guaranteed cash wage climbs every July.

Who Counts as a Tipped Employee

Chicago defines a tipped employee as someone who customarily and regularly receives more than $30 per month in gratuities.⁵ Full-time or part-time doesn’t matter. What matters is whether your position regularly produces tips above that threshold.

For your employer to use the tip credit at all, the business must employ four or more people, and you must perform at least two hours of work within Chicago in any two-week period.⁶

What you actually do during a shift matters too. If you spend most of your hours on side work that doesn’t generate tips, like rolling silverware, cleaning, or stocking, your employer’s claim to the tipped rate gets weaker. The federal Department of Labor’s “80/20 rule,” which required the full minimum wage once non-tipped duties passed 20% of your time, was struck down by a court in 2024, though some jurisdictions and courts still apply versions of it. If a large share of your shift is non-tipped work, keep your own record of those hours.

Your Employer Has to Make Up Short Shifts

Every pay period, your cash wage plus your actual tips must equal at least $16.60 per hour. If a slow lunch or a bad weather night means your tips don’t close the gap, your employer must pay the difference. The obligation applies hour by hour, not as a weekly average.³

This is where most tip credit violations happen. Some employers don’t track tips tightly enough to catch shortfalls. Others calculate the top-off across a whole week, which hides the shifts where tips fell short. Comparing your own shift records against your pay stub is the fastest way to catch underpayment.

Overtime for Tipped Workers

Overtime is calculated from the full minimum wage, not the lower tipped cash wage, then reduced by the current tip credit.⁷ At current rates, $16.60 times 1.5 equals $24.90. Subtract the $3.98 tip credit, and the minimum overtime cash wage is $20.92 per hour. If your tips during overtime hours don’t bring you up to $24.90, your employer owes the difference. As the tip credit shrinks each year, that overtime cash wage will keep climbing.

Tip Pooling Rules

Tip pooling is legal in Chicago, but who can share depends on whether the employer takes the tip credit. When the credit is in use, only workers in traditionally tipped roles can be in the pool: servers, bartenders, bussers, and similar positions.⁸ When the employer pays the full minimum wage and takes no credit, back-of-house staff like cooks and dishwashers can also be included.

Managers, supervisors, and business owners cannot share in tip pools or keep any portion of employee tips. The narrow exception is a manager who personally and directly serves a customer and is tipped individually for that specific service. An owner with at least a 20% equity stake who is actively involved in managing the business is specifically barred from the pool.⁸

One trap: a mandatory service charge added to a bill is not a tip. Service charges are legally wages paid by the employer, not gratuities from the customer, so they don’t count toward the tip credit and the employer has more control over how they’re split. If your restaurant adds an automatic gratuity on large parties, ask whether that money reaches the service staff.

If You’re Being Underpaid

You can file a complaint with Chicago’s Office of Labor Standards, part of the Department of Business Affairs and Consumer Protection. Complaint forms can be submitted by mail to 2350 W. Ogden Ave., Chicago, IL 60608, by email to BACPlaborstandards@cityofchicago.org, or by fax to 312-743-1841 with a cover sheet.⁹ The office will schedule an intake interview after receiving your complaint. Specifics move investigations faster, so include dates, hours, pay amounts, and any records you have.

You can also skip the administrative route and file a private lawsuit in Cook County Circuit Court. In a successful civil action, you can recover up to three times the amount of underpayment, plus court costs and attorney’s fees.⁶ A $2,000 shortfall can become a $6,000 liability before legal fees.

Chicago law also prohibits retaliation against workers who report wage violations, file complaints, or cooperate with investigations. If your employer fires you, cuts your hours, or takes any other adverse action because you raised a wage issue, you can recover:⁶

Reinstatement to your previous position or an equivalent one
Triple back pay for wages you would have earned
Actual damages for other losses caused by the retaliation
Attorney’s fees and costs as determined by the court

Employers have one defense: showing they relied on a reasonable interpretation of the law and corrected the violation within 30 days of learning about it can defeat a retaliation claim.⁶ The exception is narrow and won’t shield an employer who knowingly underpays and then punishes you for raising it. If you’re concerned about retaliation, keep written records, including texts, emails, and schedule changes, both before and after you report the problem.

1
City of Chicago. Minimum Wage
2
Illinois Department of Labor. Minimum Wage Law
3
City of Chicago. Chicago Office of Labor Standards – Minimum Wage Fact Sheet
4
Municipal Code of Chicago. Chicago Municipal Code 6-105-020 – Minimum Hourly Wage
5
City of Chicago. Chicago Minimum Wage Rules Supporting Article II of the Municipal Code
6
City of Chicago. Substitute Ordinance – Chicago Minimum Wage Ordinance
7
City of Chicago. Chicago Minimum Wage FAQs
8
U.S. Department of Labor. Fact Sheet #15 – Tipped Employees Under the Fair Labor Standards Act
9
City of Chicago. Office of Labor Standards Complaint Form