Texas Minimum Wage for Tipped Employees: $2.13 Rate, Pooling, and Overtime

The minimum wage for tipped employees in Texas is $2.13 per hour in direct cash wages, with the worker’s tips expected to bring total hourly pay to at least $7.25. If tips fall short in any workweek, the employer has to pay the difference. Texas doesn’t set its own tipped wage; the Texas Minimum Wage Act adopts the federal rate and the federal tip credit structure.¹

How the $2.13 Rate Actually Works

The gap between $2.13 and $7.25 is called the tip credit. An employer can claim up to $5.12 per hour against the minimum wage, counting your tips toward that amount.² The credit can never exceed the tips you actually received.

Say you work a slow lunch and bring in only $3.00 in tips over two hours. Your employer can’t claim a $5.12-per-hour credit against those hours. They owe the difference so your pay still works out to at least $7.25 per hour. This make-up calculation is done on a workweek basis: your employer looks at total hours, total cash wages paid, and total tips received for the week, then covers any shortfall.²

Who Counts as a Tipped Employee

Federal law defines a tipped employee as someone who regularly receives more than $30 per month in tips.³ Servers, bartenders, and valets clear that bar easily. A dishwasher who occasionally gets a few dollars from a shared pool but rarely tops $30 in a month doesn’t qualify, and the employer owes the full $7.25 for every hour that worker is on the clock.

Only voluntary customer payments count as tips. Mandatory service charges — the automatic gratuity added to a large party’s bill, for example — belong to the employer as business receipts, and management decides whether to pass any share along to staff.⁴ If your only “tip” income comes from redistributed service charges, you aren’t earning tips in the legal sense, and your employer can’t pay you the $2.13 rate.

What Your Employer Has to Tell You First

Before paying the tipped rate, an employer must inform each tipped worker of five things:²

The cash wage amount the employer will pay (at least $2.13 per hour).
The tip credit amount the employer is claiming against the minimum wage (up to $5.12).
That the credit claimed cannot exceed the tips the employee actually receives.
That all tips belong to the employee, except amounts redistributed through a valid tip pool.
That the tip credit does not apply unless the employee has been told all of the above.

The notice can be oral or written. An employer who skips it loses the tip credit entirely and owes the full $7.25 for every hour worked, retroactively. This is one of the most common wage violations in restaurants, and it is also one of the easiest to prove when there’s no written record of a notice.

Tip Pooling and Who Can’t Take a Share

Tip pooling is legal in Texas, and many restaurants require it. Tipped workers contribute a share of their tips to a pool, which is then split among staff who regularly deal with customers: servers, bartenders, bussers, hosts. Being in a tip pool doesn’t change your employer’s duty to pay at least $2.13 per hour in cash, and the make-up pay rule still applies if your pooled tips plus cash wages come in under $7.25 for the week.⁵

Managers, supervisors, and owners cannot take any share from a tip pool.⁶ A manager may keep a tip only when a customer hands it directly to them for service the manager personally and solely provided, and even then they cannot dip into the tip pool or shared jar.⁵ This catches small restaurant owners who work the floor. Running food and pouring drinks all night doesn’t change the rule.

Side Work vs. a Second Job

Tipped workers do plenty of tasks that don’t directly produce tips: rolling silverware, wiping tables, restocking condiments, brewing coffee. Whether those hours can be paid at $2.13 depends on whether the work is part of the tipped occupation or a separate job.

Related side work within a tipped job — a server setting tables, a bartender cutting garnishes — stays part of the tipped occupation, and the employer can keep applying the tip credit. A genuinely separate non-tipped job performed by the same worker — a server assigned to paint the dining room or do bookkeeping — can’t be paid at the tipped rate. Those hours must be paid at $7.25 or more.⁷

The older “80/20” rule that capped non-tip-producing support work at 20 percent of a shift is no longer in force. The Department of Labor formally removed it in December 2024.⁷

How Overtime Is Calculated

Tipped employees get overtime for hours over 40 in a workweek, but the math is not time-and-a-half on $2.13. Overtime is computed on the full minimum wage, and then the tip credit comes off.

The calculation: $7.25 × 1.5 = $10.875 per overtime hour. Subtract the $5.12 tip credit, and the employer owes a direct cash wage of $5.76 for each overtime hour.⁸ The tip credit stays at $5.12; it doesn’t grow during overtime. An employer who simply pays 1.5 times $2.13, around $3.20 per overtime hour, is underpaying by more than $2.50 for every one of those hours.

Deductions That Aren’t Allowed

Employers sometimes try to pass business costs to tipped workers through paycheck deductions: uniforms, broken dishes, register shortages, walkouts, credit card processing fees on tips. The FLSA bars any deduction that drops a tipped employee’s pay below the minimum wage.² Because the cash wage is already only $2.13, almost any deduction pushes it below the floor.

Employers also cannot keep any portion of your tips for business purposes.³ Charging a server for a dine-and-dash out of their tips, requiring uniforms that drop effective pay below $7.25, or withholding tips to cover breakage all violate this protection. If something is deducted from your paycheck or your tips, check whether your effective hourly rate still clears $7.25 afterward. If it doesn’t, the deduction is illegal regardless of what you signed.

Reporting Your Tips for Taxes

Tips are taxable income. If you receive $20 or more in cash, check, and card tips in a calendar month from a single employer, you have to report the total to that employer by the 10th of the following month.⁹ Tips under $20 in a month from one job don’t need to be reported to the employer, but you still owe tax on them.

Your employer uses what you report to withhold income tax, Social Security, and Medicare, and reported tips appear in Box 1 of your W-2. On your annual return you must report all tips, including cash tips under $20 per month and the value of noncash tips like event tickets, whether or not you reported them to your employer during the year.⁹

A daily log makes this manageable. The IRS provides Form 4070A for the purpose, inside Publication 1244. Record the date, cash and card tips received, and the value of any noncash tips. Don’t include mandatory service charges your employer added to bills; those are wages, and the employer reports them separately.¹⁰

If You Think You’re Being Underpaid

If your employer isn’t paying the required cash wage, isn’t making up shortfalls, is keeping tips, or is miscalculating overtime, you can file a wage claim with the Texas Workforce Commission. The claim form asks for your employer’s information, your pay rate, the wage agreement, and how you believe you were underpaid.¹¹

You can also file a complaint with the U.S. Department of Labor’s Wage and Hour Division, which enforces the FLSA independently. A federal complaint is often the better route when the issue is a missing tip credit notice or a tip pool that includes managers, since those are FLSA-specific protections. Filing is free with either agency, and retaliating against a worker for filing a wage complaint is illegal under both state and federal law.

1
State of Texas. Texas Labor Code Section 62.051 – Minimum Wage
2
U.S. Department of Labor. Fact Sheet 15 – Tipped Employees Under the Fair Labor Standards Act
3
Office of the Law Revision Counsel. 29 USC 203 – Definitions
4
Cornell Law Institute. Texas Administrative Code 34 TAC 3.337 – Gratuities
5
Texas Workforce Commission. Tip-Pooling / Tip-Sharing
6
U.S. Department of Labor. Fact Sheet 15B – Managers and Supervisors Under the Fair Labor Standards Act and Tips
7
Federal Register. Tip Regulations Under the Fair Labor Standards Act – Restoration of Regulatory Language
8
U.S. Department of Labor. FLSA Overtime Calculator Advisor
9
Internal Revenue Service. Publication 531 – Reporting Tip Income
10
Internal Revenue Service. Tip Recordkeeping and Reporting
11
Texas Workforce Commission. Wage Claim and Appeal Process in Texas