What happens if a tipped employee's tips do not bring total earnings to the minimum wage?

The employer must pay the difference so that the employee receives at least the full minimum wage in combined cash wages and tips.

2020 North Carolina Tipped Minimum Wage

Name: 2020 North Carolina Tipped Minimum Wage
Creator: DOL

The 2020 North Carolina Tipped Minimum Wage is $2.13.

Minimum cash wagetipped employees$2.13

Effective 2020-01-01Source: Minimum Wage in N.C. (North Carolina Department of Labor)Verified 2026-08-30

Compared with 2019

Every figure on this page is unchanged from 2019.

Item	2019	2020	Change
Minimum cash wage	$2.13	$2.13	+$0 (+0.0%)

Who it applies to

Employers in North Carolina who have tipped employees and are covered by the state minimum wage law

What changed this year, and why

The minimum cash wage for tipped employees in North Carolina is $2.13 per hour.

Common questions

What is the minimum cash wage for tipped employees in North Carolina?: Employers must pay tipped employees at least $2.13 per hour in cash wages, as long as the employee's tips bring total earnings to at least the full minimum wage.
What happens if a tipped employee's tips do not bring total earnings to the minimum wage?: The employer must pay the difference so that the employee receives at least the full minimum wage in combined cash wages and tips.

Who counts as a tipped employee

In North Carolina, if you work in an occupation where tips are a regular part of your pay, your employer may classify you as a tipped employee and use those tips toward the minimum wage obligation. The Department of Labor's page does not spell out a dollar threshold for tips received; instead, it refers to the category of employers who have "tipped employees" and explains what those employers must do to take a tip credit. In practice, this means the federal rule defining a tipped employee — someone who customarily and regularly receives more than a set monthly amount in tips — is what determines whether the lower cash wage of $2.13 applies to you in North Carolina. If your job does not customarily produce regular tips, your employer cannot pay you below the full minimum wage.

For employers who have “tipped employees,” employers are permitted to take a credit for a certain amount of tips earned by their employees toward the employers’ payment of the minimum wage.
Minimum Wage in N.C. (North Carolina Department of Labor)

What a tip credit is, and the cash wage underneath it

In North Carolina, the Department of Labor allows employers to count a portion of tips toward the minimum wage through a mechanism called the tip credit. Under this rule, employers must pay tipped employees a direct cash wage of at least $2.13 per hour, and the tip credit equals the difference between that cash wage and the full minimum wage of $7.25. This means your employer can credit your tips toward the gap between the cash wage and the minimum wage. However, this arrangement only works if you actually earn enough in tips to cover that gap. If your tips fall short, the employer must pay the difference. The tip credit system is designed to ensure that tipped workers receive at least the full minimum wage when combining their cash wages and tips, while allowing employers to factor expected tip income into their payroll costs. For this system to apply, you must be properly notified and retain all of your tips.

In North Carolina, an employer MUST pay at least $2.13 an hour to tipped employees as long as each employee receives enough in tips to make up the difference between the wages paid and the minimum wage ($7.25).
Minimum Wage in N.C. (North Carolina Department of Labor)

When the tips do not get you to the minimum wage

North Carolina law protects tipped workers when their tips don't bring their total earnings up to the minimum wage. Even though employers can pay a cash wage of $2.13 per hour, they cannot use the tip credit to pay you less than the minimum wage overall. If your tips in a given workweek fall short of making up the gap between the cash wage and the minimum wage, your employer must increase your cash pay to cover the difference. This guarantee applies every pay period, not just on average over time. The responsibility falls entirely on the employer to monitor your tip income and make up any shortfall. This rule ensures that no tipped employee in North Carolina earns less than the full minimum wage in any week, regardless of how slow business might be or how few customers leave tips.

Employers MUST pay more than the $2.13 hourly cash wage if the tipped employee earns less than the credit in tips per hour, as it is the employer’s responsibility to make sure that all tipped employees earn at least the minimum wage in cash wages and tips.
Minimum Wage in N.C. (North Carolina Department of Labor)

The notice an employer owes you before it takes the credit

Before an employer in North Carolina can take a tip credit, they must give you advance notice and allow you to keep all your tips. The law also requires the employer to maintain accurate and complete records of the tips you receive, and you must certify those tips monthly or for each pay period. This notice requirement ensures you understand how your wages are being calculated and that you're aware of your right to retain all tip income. Without proper notification, the employer cannot legally use the tip credit arrangement and must pay you the full minimum wage directly. The record-keeping and certification requirements create accountability on both sides, ensuring the tip credit is calculated correctly and that employers don't underpay workers based on unreported or disputed tip amounts.

However, for an employer to be able to count tips as wages and take a tip credit towards the minimum wage, the law requires that tipped employees be notified in advance and be permitted to retain all tips, and requires that the employer maintains accurate and complete records of tips received by each employee and such tips must be certified by tipped employees monthly or for each pay period.
Minimum Wage in N.C. (North Carolina Department of Labor)

When state law gives more than the federal rule

North Carolina's tipped wage rules interact with federal law, and when both apply, employers must follow whichever standard provides greater protection to workers. The federal Fair Labor Standards Act sets its own minimum cash wage and tip credit rules, while North Carolina law establishes the $2.13 cash wage requirement. If federal law offers stronger protections—such as higher minimum wages or stricter notice requirements—employers in North Carolina must comply with those federal standards instead. This principle ensures that workers always receive the benefit of the most favorable rule, whether it comes from state or federal law. For tipped employees, this means your actual rights may be stronger than what North Carolina law alone provides, depending on how federal regulations have evolved. Employers cannot cherry-pick the weaker standard when two different laws apply to the same workplace.

The minimum wage in North Carolina is currently $7.25 an hour. Employers doing business in North Carolina are required to pay at least $7.25 per hour to all employees (agricultural and domestic employees are subject to the federal minimum wage).
Minimum Wage in N.C. (North Carolina Department of Labor)

Your employer, your manager and your supervisor may not keep your tips

In North Carolina, the law requires that tipped employees be permitted to retain all of their tips. Employers, managers, and supervisors cannot keep any portion of the tips you earn, whether they take a tip credit or not. This protection applies regardless of whether tips are given directly to you, added to a credit card payment, or collected through a tip pool. The employer's only right regarding your tips is to count them toward the tip credit calculation after you've received them. Any arrangement that diverts your tips to the business, to supervisors, or to non-tipped workers violates this rule. This protection ensures that tip income actually goes to the workers who earned it through customer service, rather than being absorbed by the employer or distributed to people who didn't provide the service.

However, for an employer to be able to count tips as wages and take a tip credit towards the minimum wage, the law requires that tipped employees be notified in advance and be permitted to retain all tips, and requires that the employer maintains accurate and complete records of tips received by each employee and such tips must be certified by tipped employees monthly or for each pay period.
Minimum Wage in N.C. (North Carolina Department of Labor)

Which tip pools you can be made to join

Tip pooling is allowed in North Carolina, but only under specific conditions. For businesses covered by the North Carolina Department of Labor—generally those with less than $500,000 in gross sales—tipped employees can be required to share their tips, but they must retain at least 85 percent of all tips they receive. This means most of the tip income stays with the tipped workers, while the employer may direct a smaller portion elsewhere or use it to cover administrative costs of running the pool. The employer must maintain accurate and complete records of all tips received and the amounts earned under the tip pooling arrangement. Tip pooling cannot include supervisors, managers, or the employer themselves. The 85 percent retention requirement ensures that while some sharing is permitted, the workers who directly serve customers keep the vast majority of the tip income they generate.

In businesses that are covered by NCDOL for minimum wage (generally businesses that make less than $500,000 in gross sales), tip pooling is permitted as long as the tipped employees retain at least 85 percent of the tips they receive, which means the employer must maintain accurate and complete records of the tips received and the amount of tips earned under the tip pooling arrangement.
Minimum Wage in N.C. (North Carolina Department of Labor)

Doing two jobs for one employer

When you work in multiple roles for the same employer in North Carolina, the tip credit rules apply only to the time you spend in tipped occupations. If you work some hours as a server receiving tips and other hours in a non-tipped position like cooking or cleaning, your employer can only pay the $2.13 cash wage for the hours you actually work as a server. For the non-tipped hours, they must pay you at least the full minimum wage. The employer cannot average your tips across all your work time or use the tip credit for hours when you weren't in a tipped role. This rule prevents employers from misclassifying workers or from using the lower tipped wage for work that doesn't generate tip income. You're entitled to the full minimum wage for any work that falls outside the definition of a tipped occupation, even if you also have tipped duties at the same workplace.