Illinois Minimum-Wage and Tip-Credit Rules: What Hospitality Workers Need to Know

Illinois Minimum-Wage and Tip-Credit Rules: Key Takeaways

• Illinois statewide minimum wage is $15.00 per hour with a tip credit up to 40%, allowing a $9.00 base wage for tipped workers.
• Chicago has a higher minimum wage of $16.60 per hour for non-tipped employees and is phasing out the tip credit by 2028.
• Tip pooling is allowed only among employees who customarily receive tips; managers and kitchen staff cannot participate.

This article explains essential minimum wage and tip credit regulations for hospitality workers in Illinois, with a focus on statewide and Chicago-specific rules.

It highlights how these rules affect pay, tip pooling, overtime, and employee rights in the hospitality industry.

1. Overview of Illinois Minimum Wage and Tip Credit Rules for Hospitality Workers

As of August 2025, Illinois law sets the statewide minimum wage at $15.00 per hour. Employers can take a tip credit of up to 40%, meaning tipped employees may be paid a base wage as low as $9.00 per hour. However, if an employee’s tips combined with this base wage fall short of the full minimum wage, the employer must make up the difference to ensure the total hourly compensation equals at least $15.00.

This tip credit system allows employers to legally pay a reduced cash wage to tipped employees, but only if tips make up the rest of the minimum wage. Transparency and accurate record-keeping of tips are important to comply with these rules.

Statewide Minimum Wage and Tip Credit Details

• The full minimum wage: $15.00 per hour.
• Maximum tip credit: 40% of the minimum wage, which equals $6.00.
• Minimum base wage for tipped employees: $9.00 per hour.
• Employer liability if tips are insufficient: Must pay difference to reach $15.00.

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2. Chicago-Specific Minimum Wage and Tip Credit Rules

Chicago sets its own wage standards, which are more generous than the statewide minimums. As of July 1, 2025, the minimum wage in Chicago is $16.60 per hour for non-tipped employees. Tipped employees are currently paid a minimum of $12.62 per hour, but there is a phase-out plan for the tip credit.

By 2028, Chicago intends to eliminate the tip credit entirely. This means by that year, employers must pay tipped hospitality workers the full minimum wage without reducing it due to tips. This phased approach reflects an effort to ensure fairer wages for tipped employees in the city.

Tip Credit Phase-Out in Chicago

Employers should prepare for the tip credit to gradually disappear in Chicago over five years. The end result will be tipped employees receiving the full $16.60 hourly rate, regardless of tips collected. This change underscores the importance of following local ordinances distinct from Illinois state law.

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3. Tip Pooling Rules for Illinois Hospitality Workers

Illinois law permits tip pooling among employees who customarily receive tips such as servers and bartenders. This is a common practice in the hospitality industry to share gratuities among front-of-house staff.

However, managers, supervisors, and "back-of-house" employees like cooks and dishwashers are prohibited from participating or receiving any portion of the tip pool. The goal is to ensure tips benefit the employees who directly serve customers.

Who Can Participate in Tip Pooling

• Servers
• Bartenders
• Other staff regularly receiving tips

Restrictions on Tip Pool Participants

• No managers or supervisors allowed.
• No kitchen or back-of-house staff participation.

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4. Service Charges and Credit Card Fees Impact on Tips

Employers sometimes add mandatory service charges to customers’ bills. Under Illinois law, such service charges are not considered tips and belong to the employer. To be classified as a tip, the amount must be voluntarily given by the customer, who must control the amount and recipient of the gratuity.

Regarding credit card payments, Illinois does not prohibit employers from deducting credit card processing fees from employee tips. This practice can reduce the amount a tipped employee actually takes home, so hospitality workers should be aware of these deductions.

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5. Overtime Pay and Record-Keeping Requirements for Tipped Workers

Tipped hospitality workers in Illinois are entitled to overtime pay at 1.5 times the state minimum wage rate for hours worked over 40 in a workweek. Importantly, the overtime rate is calculated based on the full $15.00 minimum wage, not the lower tipped wage. This ensures tipped employees receive fair compensation for extra hours worked.

Employers are required to maintain comprehensive records of all reported tips, including amounts and dates. If the workplace uses tip pooling, records must also document the tip pooling arrangements and distributions among employees. Proper documentation is critical for resolving disputes and for legal compliance.

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6. Penalties for Non-Compliance and Protecting Worker Rights

Illinois employers who violate tip laws face penalties of up to $1,162 per violation, along with possible civil penalties and legal fees. These fines highlight the importance of employers understanding and adhering strictly to wage and tip regulations.

Hospitality workers should know their rights concerning minimum wage, tip credits, tip pooling, and overtime. If workers believe their employer is not complying with Illinois or Chicago laws, they may file complaints with the Illinois Department of Labor or seek legal advice.

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7. Additional Resources for Illinois Hospitality Workers

For hospitality workers and employers looking for official information or assistance, the following resources are invaluable:

• U.S. Department of Labor – Minimum Wages for Tipped Employees
• Illinois Department of Labor
• City of Chicago – Minimum Wage Information

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Illinois Minimum-Wage and Tip-Credit Rules: Conclusion

Hospitality workers in Illinois must understand the complex landscape of minimum wage and tip credit rules that vary by location. While the statewide minimum wage stands at $15.00 with a maximum 40% tip credit, Chicago offers higher wages and is eliminating tip credits by 2028.

Tip pooling is legal only among staff who usually receive tips, managers and kitchen employees are excluded. Additionally, tipped workers are entitled to overtime pay based on the full minimum wage, and employers must maintain thorough tip records. Awareness of these rules helps ensure fair compensation and protects worker rights in the hospitality industry.

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