For tipped workers, the hourly wage on the paycheck is only part of the story. To compare shifts, jobs, or restaurants, you need your total earnings per hour: wages plus the tips you keep.
Step 1: Add up your tips
Add cash tips and card tips for the shift or week. Card tips are often shown on your end-of-shift report.
Step 2: Subtract tip-outs
Many servers share tips with bussers, bartenders, or food runners. Tip-outs are usually set one of three ways:
| Method | Example on $800 sales and $200 tips |
|---|---|
| Percentage of sales | 3% of $800 = $24 |
| Percentage of tips | 15% of $200 = $30 |
| Fixed amount | $20 per shift |
Step 3: Add your wages
Multiply your hours by your hourly wage from your employer.
Step 4: Divide by hours
Hourly pay with tips = (wages + tips − tip-out) ÷ hours
Example
A 6-hour shift at $12.00 an hour with $200 in tips and a $20 tip-out:
- Wages: 6 × $12.00 = $72.00.
- Tips kept: $200 − $20 = $180.00.
- Total: $252.00.
- Per hour: $252.00 ÷ 6 = $42.00, of which $30.00 an hour is tips.
Tips as a percentage of sales
Dividing tips by sales shows how generously guests tipped, separate from how busy the shift was. $200 in tips on $800 in sales is 25%.
Federal tip rules in brief
- Under the federal FLSA, employers may not keep any part of employees’ tips, and managers and supervisors may not take tips from a pool.
- Employers may pay a cash wage as low as $2.13 an hour and count tips toward the federal minimum wage, as long as wages plus tips reach at least the minimum wage. Many states require a higher cash wage or do not allow this.
- Tips are taxable income. The IRS asks you to keep a daily tip record and report tips to your employer.
Tools
- Tip income calculator: wages, tips, tip-outs, and hourly pay for a shift or week.
- Annual income calculator: add a year of tips to your other income.
Sources
- U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the FLSA
- Internal Revenue Service, Publication 531: Reporting Tip Income
About this guide. Written for US employees as general information, not legal or tax advice. Rules can differ by state, employer, and contract. See our methodology and disclaimer.