Montana Minimum Wage for Tipped Employees: The Tip Credit

We have talked about the tip credit in the context of the minimum wage several times, and these developments in Montana allow us a chance to take a closer look at the tip credit. Because to be honest, I am a little bit rusty on the topic, having not waited tables in, oh, about 30 years! But seriously, the tip credit is something that 43 states in the Union have in the books under their minimum wage law, so it is an important topic when it comes to minimum wages, and a pretty big bone of contention when deciding how to increase a state minimum wage, as evidenced by the debates going on in Montana.

What the tip credit is is a law that allows eatery owners and any other food-focused types business like a tavern, where many employees serve food to customers and earn tips, to only pay servers about $2.13 per hour. Then comes into play the tip credit, which means the rest of the employee’s minimum wage requirements will be made up in tips. In the event that tips do not make up the difference between $2.13 per hour and the minimum wage, then the employer would have to make up the difference.

In Montana, though, there is no tip credit, and the new law does not account for a tip credit. Instead, eatery owners in the state must pay their waitresses and waiters and other tipped employees the full minimum wage of $6.15 per hour. Whatever tips they make go on top of that. The other side of that, though, is that the owners and employers then have to also pay full payments on unemployment insurance, workers’ comp, and Social Security based on that full minimum wage, plus whatever the employees bring in on tips.

The new Montana bill on the topic would not change this however. It merely stops the minimum wage increases for tipped employees at the current level of $6.15 per hour.