Illinois Tipped Minimum Wage: Rates, Tip Credit, and Overtime

The Illinois tipped minimum wage is $9.00 per hour in direct wages as of 2025, which is 60% of the state’s $15.00 minimum wage. Employers make up the gap through a “tip credit” of up to $6.00 per hour, assuming customer gratuities cover the difference. Chicago and Cook County set their own, higher rates, and Chicago is phasing out the tip credit entirely by July 2028.

The Statewide Rate and How the Tip Credit Works

Under the Illinois Minimum Wage Law (820 ILCS 105/4), workers 18 and older are entitled to $15.00 per hour. Employers in tipped occupations may pay 60% of that figure directly, which comes to $9.00 per hour, and claim the remaining 40% as a tip credit.¹ The maximum credit at the state rate is $6.00 per hour.²

The arrangement only works if tips actually show up. If your direct wages plus reported tips don’t reach the full $15.00 for every hour in a pay period, the employer owes the shortfall. An employer can’t average a strong week against a slow one to escape the obligation.

A worked example: a server puts in 30 hours in a week at $9.00, earning $270 in direct wages, and reports $120 in tips. Effective hourly rate: ($270 + $120) ÷ 30 = $13.00. That’s $2.00 under the minimum, so the employer owes an additional $60.00 for that week.¹

Illinois statute also requires employers to produce “substantial evidence” that the worker actually received the claimed tip amount during the pay period.² An employer who claims a $6.00 credit but can’t document that the worker earned at least $6.00 per hour in tips is out of compliance.

Workers under 18 who log fewer than 650 hours in a calendar year have a separate minimum wage of $13.00 per hour.¹ The state’s published tables don’t list a separate tipped rate for minors.

Chicago Tipped Wage and the Phaseout Through 2028

Chicago’s minimum wage applies to employers with four or more employees. As of July 1, 2025, tipped workers in the city must earn at least $12.62 per hour in direct wages, with tips expected to close the gap to the full $16.60 Chicago minimum.³

The city is eliminating the tip credit on a five-year schedule set by the Office of Labor Standards. Each July 1 brings a reduction:⁴

July 1, 2024: credit cut to 32% of the Chicago minimum wage
July 1, 2025: credit cut to 24%
July 1, 2026: credit cut to 16%
July 1, 2027: credit cut to 8%
July 1, 2028: no credit; tipped workers earn the full Chicago minimum wage directly

If a Chicago tipped worker’s direct wages plus tips fall short of the full minimum, the employer owes the difference, same as under state law.⁴

Cook County Tipped Wage

Cook County has its own minimum wage ordinance, which applies in municipalities that haven’t opted out. As of July 1, 2025, the county’s non-tipped minimum is $15.00 per hour and the tipped minimum is $9.00 per hour. Overtime for tipped workers in Cook County is $16.50 per hour beyond 40 hours in a workweek.⁵ Some suburban communities have opted out and use the state rate instead, so check your specific municipality.

Who Counts as a Tipped Employee

Federal law defines a tipped employee as someone who customarily and regularly receives more than $30 per month in gratuities. Illinois statute doesn’t set its own dollar figure; it refers to workers in occupations where gratuities have “customarily and usually constituted” part of pay.² The $30 federal threshold is the working test. Servers, bartenders, and other front-of-house staff clear it easily. Someone who only picks up occasional tips below that line doesn’t qualify and must be paid the full minimum wage.

Side work complicates things. Rolling silverware, restocking condiments, brewing coffee, and similar tasks that support tipped work can be paid at the tipped rate under the federal Department of Labor’s restored 1967 dual-jobs regulation, which replaced the earlier “80/20/30” rule after a federal appeals court struck it down. But if you work two genuinely distinct jobs for the same employer (say, a hotel maintenance worker who also waits tables), the employer can only apply the tip credit to the hours spent in the tipped job.⁶

Notice the Employer Must Give Before Claiming the Credit

Federal regulations at 29 CFR 531.59(b) bar an employer from taking a tip credit at all unless it has told the employee, in advance, four things:⁷

the direct cash wage the employer will pay
the tip credit amount the employer intends to claim from tips
that the employee keeps all tips except any contributed to a valid tip pool
that the credit cannot apply to any employee who hasn’t been given this notice

If an employer skips the notice and takes the credit anyway, it owes back wages at the full minimum wage for every hour worked during that period. This is one of the most common wage-and-hour violations in restaurants and one of the easiest to prove.

Overtime Pay for Tipped Workers

Tipped employees who work more than 40 hours in a workweek are entitled to overtime, but the regular rate used in the calculation is the full minimum wage, not the $9.00 cash base.⁸

At the Illinois state rate the math runs:

Regular rate: $9.00 cash + $6.00 tip credit = $15.00
Overtime rate: $15.00 × 1.5 = $22.50
Minus the tip credit: $22.50 − $6.00 = $16.50 direct cash wage for each overtime hour

The tip credit claimed during overtime hours can’t be larger than the credit claimed during regular hours.⁸ An employer who simply pays 1.5 times the tipped base ($9.00 × 1.5 = $13.50) is underpaying by $3.00 per overtime hour.

Tip Pooling Rules

Mandatory tip pools are legal in Illinois, but who can share depends on whether the employer takes a tip credit. When the employer uses the tipped rate and claims a credit, the pool is limited to workers who customarily receive tips: servers, bartenders, bussers, hosts, and similar front-of-house staff.⁹ Cooks, dishwashers, and other back-of-house staff can’t be included under that arrangement.

If the employer pays the full minimum wage with no tip credit, the pool can be broader and may include non-tipped positions like kitchen staff.⁹ That distinction will matter more in Chicago as the credit shrinks toward zero in 2028.

Whatever the arrangement, managers, supervisors, and owners holding at least a 20% equity interest who are actively involved in management may never take a share of a tip pool or tip jar. A manager who personally serves a table keeps the tips received directly for that service but can’t dip into anyone else’s tips.¹⁰

Service Charges Are Not Tips

Not every extra line on a check is a tip. A payment counts as a tip under IRS rules only if the customer gives it freely, chooses the amount without restriction, isn’t subject to a policy or negotiation dictating that amount, and decides who receives it.¹¹

Automatic gratuities on large-party checks, banquet fees, bottle service charges, and hotel room service fees usually fail at least one of those tests and are classified as service charges. Service charges are the employer’s money, not the employee’s, even when the employer passes some along. When distributed to employees, they’re treated as regular wages for tax purposes. Labeling a line item “gratuity” on a receipt doesn’t make it one if the customer had no real choice about the amount.¹¹

Credit Card Fee Deductions

When a tip is left on a credit card, the employer pays a processing fee on the full charge, including the tip portion. Federal law lets the employer deduct the proportional fee from the tip, but only the actual fee the card processor charges, and only if the deduction doesn’t drop the employee below the minimum wage.⁹ On a 3% processing fee and a $20 tip, that’s 60 cents.

Credit card tips have to be paid no later than the regular payday; the employer can’t wait on reimbursement from the card company.⁹ Illinois has no state law specifically barring the deduction, so the federal standard controls.

What to Do If You’ve Been Underpaid

Illinois treats wage theft seriously. Under the Wage Payment and Collection Act (820 ILCS 115/14), a worker who hasn’t been paid properly can file a claim with the Illinois Department of Labor or sue in court, but not both. Recovery includes all unpaid wages plus damages of 5% of the underpayment for every month it goes unpaid, with no cap on how long that 5% keeps accruing.¹²

Employers ordered by the Department of Labor to pay also owe non-waivable administrative fees: $250 on orders up to $3,000, $500 on orders over $3,000, and $1,000 on orders of $10,000 or more.¹³ For an employer that routinely shortchanges tipped staff by small amounts, the penalties stack quickly across workers and pay periods.

Keeping your own daily log of hours worked and tips received, by source, is the single most useful thing you can do to protect yourself. Those records back up your tax reporting and serve as evidence if a wage dispute ever surfaces.¹⁴

1
Illinois Department of Labor. Minimum Wage Law
2
Illinois General Assembly. 820 ILCS 105/4 – Establishment of Minimum Wage
3
City of Chicago. Minimum Wage Information
4
City of Chicago. Chicago Office of Labor Standards – Minimum Wage Fact Sheet
5
Cook County Government. Minimum Wage Ordinance and Regulations
6
Federal Register. Tip Regulations Under the Fair Labor Standards Act FLSA – Restoration of Regulatory Language
7
eCFR. 29 CFR Part 531 Subpart D – Tipped Employees
8
U.S. Department of Labor. FLSA Overtime Calculator Advisor – Overtime Calculation Examples for Tipped Employees
9
U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act
10
U.S. Department of Labor. Fact Sheet 15B – Managers and Supervisors Under the FLSA and Tips
11
Internal Revenue Service. Tips Versus Service Charges – How to Report
12
Illinois General Assembly. 820 ILCS 115/14 – Penalties
13
Illinois Department of Labor. Wage Payment and Collection Act Penalties
14
Internal Revenue Service. Tip Recordkeeping and Reporting