2023 South Dakota Tipped Minimum Wage
The 2023 South Dakota Tipped Minimum Wage is $5.40.
Effective 2023-01-01Source: State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)Verified 2026-08-31
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Minimum cash wage | $4.975 | $5.40 | +$0.425 (+8.5%) |
Who it applies to
South Dakota employers with tipped employees
What changed this year, and why
South Dakota's minimum cash wage for tipped employees increased to $5.40 per hour on January 1, 2023, up from $4.975 in 2022. The tipped cash wage is set at half the regular state minimum wage. Employers must ensure that the employee's tips plus the cash wage total at least the full minimum wage.
Common questions
- What if tips plus the cash wage do not reach the full minimum wage?
- The employer must make up the difference so the employee receives at least the full minimum wage.
- How is the tipped cash wage calculated?
- It is half the regular state minimum wage, adjusted annually for cost of living.
Who counts as a tipped employee
A tipped employee is a worker who customarily and regularly receives tips as a standard part of their compensation. In South Dakota, employees who meet this definition may be paid the state's reduced minimum cash wage of $5.40 per hour instead of the full minimum wage that applies to non-tipped workers. This lower cash wage is permitted because the employer can count the worker's tips toward meeting the full minimum wage requirement. Workers in roles such as servers, bartenders, and bellhops typically qualify because tips are a regular and expected part of their earnings. If a South Dakota worker's job does not regularly generate tips, the employer must pay the full non-tipped minimum wage. The $5.40 cash wage represents half of the full state minimum wage, reflecting the expectation that tips will make up the other half.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
What a tip credit is, and the cash wage underneath it
South Dakota employers may take a tip credit, which is the difference between the direct cash wage they must pay and the full minimum wage. For 2023, employers must pay tipped workers a minimum cash wage of at least $5.40 per hour. The tip credit allows the employer to count the worker's tips toward satisfying the remainder of the full minimum wage. This means the employer's direct payment plus the employee's tips must together reach at least the full state minimum wage for every hour worked. The $5.40 cash wage is exactly half the non-tipped minimum wage, so the tip credit covers the other half. If the combined total falls short, the employer is responsible for covering the gap.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees. Wages and tips combined must equal at least the minimum wage.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
When the tips do not get you to the minimum wage
When a tipped employee's tips combined with the employer's direct cash wage do not reach the full minimum wage, the employer must make up the difference. In South Dakota for 2023, tipped workers must receive at least $5.40 per hour in direct wages from their employer, and their total earnings including tips must equal at least the full state minimum wage. If a worker's tips in a given pay period are insufficient to bridge the gap between the $5.40 cash wage and the full minimum wage, the employer is legally obligated to pay the shortfall so the worker receives no less than the full minimum wage for every hour worked.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees. Wages and tips combined must equal at least the minimum wage.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
The notice an employer owes you before it takes the credit
Before taking a tip credit, South Dakota employers must inform tipped employees of specific information, including the amount of the cash wage the employer will pay, the additional amount claimed as a tip credit, that the tip credit cannot exceed the tips actually received, that all tips are retained by the employee except for valid tip pooling arrangements, and that the tip credit will not apply unless the employee has been informed of these provisions. This notice requirement ensures that tipped workers in South Dakota understand how their compensation is calculated and what protections they have under the law before their employer reduces their direct wage below the full minimum.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
Your employer, your manager and your supervisor may not keep your tips
South Dakota law prohibits employers from keeping any portion of employees' tips. All tips received by tipped workers belong to those employees, with limited exceptions for valid tip pooling arrangements among eligible workers. Employers, managers, and supervisors may not retain any share of the gratuities that customers leave for service staff. This protection applies to the cash wage of $5.40 per hour that South Dakota employers may pay tipped employees, ensuring that the tip credit system does not allow business owners to profit from their workers' customer-generated income. Tips are the property of the employees who earned them through their service.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
Which tip pools you can be made to join
South Dakota employers may require tipped employees to participate in tip pools, but such pools are limited to employees in occupations in which they customarily and regularly receive tips. This means that only workers who traditionally depend on gratuities as part of their compensation—such as servers, bartenders, bussers, and hosts—may share in a mandatory tip pool. Back-of-house staff like cooks and dishwashers who do not customarily receive tips cannot be included. For South Dakota tipped workers earning the minimum cash wage of $5.40 per hour, this restriction protects their tip income from being diverted to employees who do not regularly serve customers and depend on tips as a standard part of their earnings.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
Doing two jobs for one employer
When an employee performs both tipped and non-tipped work for the same South Dakota employer, they are a tipped employee only with respect to their employment as a server or other tipped occupation. This means the employer may pay the reduced minimum cash wage of $5.40 per hour only for hours spent performing tipped duties. For time spent on non-tipped work, the employer must pay the full minimum wage. South Dakota workers who split their duties between tipped and non-tipped positions must track their time carefully to ensure they receive proper compensation for all hours worked, with the tip credit applying only to the portion of their work that qualifies as tipped employment.
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
State Minimum Wage to Increase Jan. 1 (South Dakota Department of Labor and Regulation)
- Minimum cash wage
The hourly minimum wage for tipped employees will be $5.40/hour effective Jan. 1, 2023, half the minimum wage for non-tipped employees. Wages and tips combined must equal at least the minimum wage. These increases will apply to all South Dakota employers, with some limited exceptions.
Other years
Every South Dakota Tipped Minimum Wage year · Tipped Minimum Wage in every state