Indiana Tip Laws and Requirements
Indiana follows federal Fair Labor Standards Act (FLSA) tip laws, allowing employers to take a tip credit up to $5.12 against minimum wage for tipped employees paid at least the federal minimum wage, with tips legally owned by employees and tip pooling permitted, and the state's tip laws were last updated in July 2024.
Under the Fair Labor Standards Act (FLSA), tips are regulated. Employers who meet certain criteria are permitted to take a partial credit against minimum wage obligations for tipped employees. Tipped employees include those engaged in jobs in which they regularly and customarily receive tips.
The tip credit was created by Congress in 1966, and adjustments occurred on December 28, 2021, when the 2021 Dual Jobs Final Rule went into effect. A federal court vacated portions of the final rule in October 2024, which effectively reinstated the original dual jobs regulation (29 C.F.R.531.56(e)). It recognizes that an employee may work in tipped and non-tipped occupations, and employers are only permitted to take the tip credit against minimum wage obligations for hours worked in the tipped occupation.
The FLSA mandates that a tipped worker must be paid at least $2.13 per hour. The FLSA tip credit can be equal to the difference between the direct (or cash) wage paid to the employee and the federal minimum wage. Only tips actually received by an employee count when making the determination of a tipped employee and applying the credit.
The FLSA also permits employees to “pool” or share tips with other eligible employees, although it doesn’t impose a limit on the amount or percentage of the contribution of each employee in a valid tip pool.
State law may differ from the federal FLSA standards. Review what tip laws apply in Indiana.
When Were the Tip Laws Last Updated in Indiana?
Tip laws were updated in Indiana in July of 2024.
Does Indiana Have Tip Laws That Differ from Federal Tip Laws?
No, Indiana defers to federal law regarding tips. Employers may take a tip credit of up to $5.12 as long as the tipped employee’s minimum hourly wage is the federal rate.
Who Holds the Ownership of Tips in Indiana?
Under federal law, any gratuities paid to employees are their property. Employers are not permitted to require employees to hand in their tips, although they are allowed to count the tip toward the hourly rate.
What are the Rules for Distribution of Credit Card Processing Tips in Indiana?
Federal law states that all tips paid by credit card must be issued to employees no later than the next regular payday, even if the employer is awaiting reimbursement from the financial provider.
What are the Tip Pooling Rules in Indiana?
Indiana follows federal law, which allows employers to create mandatory tip pools. Only employees who regularly receive tips are permitted to be in the pool.
Who Can and Can’t Participate in Tip Pools in Indiana?
Tipped employees can participate in tip pools. Supervisors, managers, and owners/employers may not.
Is there a Difference Between Tips and Service Charges in Indiana?
Yes, a mandatory service charge is not considered a tip. Therefore, it would belong to the employer.
To be considered a tip instead of a service charge, a customer must give money voluntarily in an amount of their own choosing. The customer must also be able to determine who receives it, and it can’t be set by employer policy.
Can Employers Deduct Credit Card Fees from Tips in Indiana?
There is no law restricting employers from deducting any credit card processing fees from employee tips.
Do Tips Count Toward the Minimum Wage in Indiana?
Yes, the tip credit can count toward minimum wage.
Do Tips Factor Into Regular Rate Calculations for Overtime Pay in Indiana?
Any eligible employee working over 40 hours in a week should receive overtime pay (1.5 times their normal hourly wage). Indiana employers are permitted to use the tip credit on overtime pay.
Are There Cities and Municipalities in Indiana That Have Their Own Tip and Service Charge Rules That Differ from Statewide Laws?
No, there are currently no cities or municipalities with differing tip or service charge rules.
What Are the Record-Keeping Requirements for Employers Regarding Tips in Indiana?
Employers must keep detailed records of all tips reported by employees, including amounts and dates of service. If tip pooling is in effect, the record should also include the arrangements and the distribution of tips to eligible staff members.
What Options Do Employees Have for Remuneration if Their Tips are Withheld in Indiana?
An employee may take legal action against an employer who violates state tip laws.
What are the Penalties for Employers for Not Complying with Indiana Tip Laws?
Knowingly violating Indiana tip laws can subject an employer to a penalty between $5,000 (minimum) and $70,000 (maximum). Repeat violations can result in a fine of $70,000 per incident. Failing to correct the violation subjects the employer to daily fines. Employees may also be permitted to recover unpaid wages in damages.
Managing the regulations associated with tips in Indiana can be a challenge. The numerical clock prompt feature allows the employee to input their received tips at the end of the shift, and that information would be available for reporting and payroll processing.
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South Carolina Tip Laws and Requirements
South Carolina adheres to federal Fair Labor Standards Act (FLSA) tip laws, which regulate tipped employees' wages, allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, mandate a minimum cash wage of $2.13 per hour for tipped workers, permit tip pooling among eligible employees without limits on contributions, and recognize that tips are the property of employees, with the state's tip laws last updated in September 2021 and no deviations from federal standards.
Montana Tip Laws and Requirements
Montana's tip laws, updated in 2021, differ from federal FLSA regulations by prohibiting employers from using a tip credit and requiring payment of the full state minimum wage—which is higher than the federal rate—to tipped employees, who retain ownership of their gratuities.
Kansas Tip Laws and Requirements
Kansas tip laws generally follow federal Fair Labor Standards Act (FLSA) regulations, including the allowance of a tip credit against minimum wage for tipped employees, the requirement to pay tipped workers at least $2.13 per hour, the recognition of dual jobs for tip credit application, the permissibility of tip pooling, and the obligation for employers to inform employees about tip credits and cash wages, with Kansas-specific provisions such as exempting cash gratuities from sales tax and aligning its 2021 updates with federal changes.
Wyoming Tip Laws and Requirements
Wyoming adheres to federal Fair Labor Standards Act (FLSA) tip laws last updated in 2013, which allow employers to take a tip credit against minimum wage only for hours worked in tipped occupations, require tipped employees to be paid at least $2.13 per hour plus tips, recognize that tips belong to employees and cannot be confiscated by employers, and permit tip pooling among eligible employees without federal limits on contribution amounts.
North Dakota Tip Laws and Requirements
North Dakota's tip laws, last updated in September 2021, align with federal standards under the Fair Labor Standards Act by allowing employers to take a tip credit against minimum wage obligations for tipped employees—who must be paid at least $2.13 per hour—with the state permitting a tip credit of up to 33% of the minimum wage and recognizing that tips are the property of employees, while also adhering to federal rules on tip pooling and the dual jobs regulation reinstated in 2024.
Delaware Tip Laws and Requirements
Delaware tip laws, last updated in January 2024, align with federal FLSA regulations but require a higher minimum cash wage of $2.23 per hour for tipped employees—$0.10 above the federal $2.13—mandate that tips belong to employees, allow tip pooling without federal limits, and follow the reinstated original dual jobs rule limiting tip credit to hours worked in tipped occupations.