How Must Employers Ensure Tipped Workers Get Minimum Wage?

The Fair Labor Standards Act (FLSA) and New Jersey law safeguard tipped employees so that they receive at least minimum wage, even when their base wage is set below the standard rate via a “tip credit.” New Jersey’s minimum wage is $15.49 per hour as of 2025. However, for tipped employees, such as table servers and bartenders, employees can be paid as low as $5.62 per hour as long as tips bring their total hourly earnings up to or above the state minimum.

To comply with the minimum wage requirement, employers must track the tips received by each employee. This means maintaining daily or weekly records of tips, which can involve using point-of-sale (POS) systems, tip reporting sheets or digital logs. At the end of each pay period, employers must reconcile each tipped employee’s earnings. This process involves reviewing the cumulative base wage and declared tips for the total hours worked. If, after adding base wages and reported tips, an employee’s total falls short of the state minimum, the employer must make up the difference, often as a supplemental payment through payroll. Failing to do so exposes the employer to liability and penalties.

New Jersey law dictates that tips are the exclusive property of the employee. Employers (including owners and managers) are strictly prohibited from retaining, sharing or diverting any portion of a worker’s tips. Similarly, mandatory service charges imposed on customers cannot be counted as tips or used to offset the employer’s wage obligations. These amounts belong to the business, not the employee, unless clearly stated otherwise to the customer.

Tipped employees should keep their own detailed records of hours worked and tips received. If an employee believes that their wages, combining base pay and tips, fall short of the minimum wage, they have these options:

• Raise the issue internally — Employees should bring their concerns to their employer or payroll department. Sometimes, discrepancies are due to honest mistakes in recordkeeping that can be quickly corrected.
• Contact the New Jersey Department of Labor and Workforce Development (NJDOL) — Employees can file a wage complaint on the web or by phone. The NJDOL will investigate, and employers found in violation may be required to pay unpaid wages, penalties and damages.
• Consult an attorney — A qualified New Jersey employment lawyer can evaluate your situation, determine if your employer is violating wage and hour laws and help pursue your legal options.

The employment law attorneys at Deutsch Atkins & Kleinfeldt, P.C. in Hackensack have wide experience in helping New Jersey workers get the protections they deserve under state and federal labor laws. To schedule a confidential consultation, call 551-245-8894 or contact us online.