Tip Credit in New York: What You Need to Know

Tip Credit in New York: What You Need to Know

As New York State increased its minimum wage for 2024, many wondered what was going to happen with the “tip credit.” The answer was announced at the end of December. Here’s a recap…

To start with the basics, the Federal government sets minimum wage. Since New York sets a higher minimum wage, it takes precedence. In New York, the minimum wage increased/is increasing effective January 1, 2024, 2025, and 2026. At the same time, the hospitality industry will experience increases in tip credits.

Hospitality employers can meet the required minimum wage through a combination of cash wages and a tip credit, which is a credit or allowance for tips employees receive from customers. The amount of the cash wage and tip credit varies by region and job classification.

Effective January 1, 2024 through December 31, 2024:

For service employees (i.e., employees who don’t serve food or beverages but typically receive tips like a bathroom attendant):

  • In NYC, Long Island, and Westchester County, the cash wage is $13.35 and the tip credit is $2.65.
  • In the remainder of New York State, the cash wage is $12.50 and the tip credit is $2.50.

For food service workers (i.e., employees who serve food or beverages and typically receive tips, like a waiter or bartender):

  • In NYC, Long Island, and Westchester County, the cash wage is $10.65 and the tip credit is $5.35.
  • In the remainder of New York State, the cash wage is $10 and the tip credit is $5.

However, hospitality employers cannot take the tip credit on days when a tipped worker spends more than 2 hours or 20% of a shift doing non-tip work and on weeks when service employees’ tips are lower than:

In resort hotels:

  • In NYC, Long Island and Westchester County: $8.95.
  • In the remainder of New York State: $8.40.

In restaurants and all-year hotels:

  • In NYC, Long Island and Westchester County: $3.45.
  • In the remainder of New York State: $3.20.

So, we enter 2024 with a New York tip credit intact, continuing the several-years-long debate on whether to eliminate sub-minimum wage for tipped workers. We’ll keep you updated as we learn more.

 

While your employment or labor attorney is the best person to contact with questions about wages, when it comes to accounting, tax, audit, or business advisory needs, RBT CPAs is here for you. Please don’t hesitate to give us a call.

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