Do Servers Get Paid So Little?

Although some servers (waiters) manage to earn a living solely off tips, their actual salaries are often far below the federally mandated minimum wage. This begs the question — do servers get paid so little? If so, how is it legal?

KEY POINTS

Working as a server can be lucrative but it all depends on how much you make from tips.
The federal minimum wage is currently $7.25 an hour — but most servers only earn $2.13 — which is less than a third of the minimum wage.

Restaurants can pay a “tip credit” of $5.12 per hour. As long as servers earn at least $5.12 per hour in tips, the restaurant can pay less than minimum wage.

If you or someone you know works as a server, they already know this, but if not, take a moment to learn why servers can sometimes make less than the minimum wage. Although tips can help supplement their earnings, it’s not always guaranteed that they’ll make enough to cover their daily expenses.

Table of Contents

KEY POINTS

Do servers get paid so little because they make tips?
How Do Servers Get Paid?
Do Servers Make Good Money?

Should I Tip Servers if it Cuts Into Their Salaries?
How Do Servers Get Paid in Countries that Don’t Tip?
Do All States Use the Same Tip Credit?

Final Thoughts
- Sources

Do servers get paid so little because they make tips?

Restaurant owners are not allowed to pay their employees less than minimum wage. However, due to loopholes in the law, restaurant owners simply must guarantee that their employees make a minimum — meaning that they can pay less by counting servers’ tips as a part of their wage.

In today’s economy, most restaurant owners require servers to report their tips and then deduct that amount from their salaries. In most states, restaurant owners are only required to pay their servers $2.13 an hour, as long as they make $5.12 in tips. If not, the employer must make up the difference to account for the federal minimum wage.

This is known as a “tip credit” and helps restaurant owners shift some of the responsibility of paying their employees to the customer. While the server will technically make minimum wage, they earn less because of this loophole.

How Do Servers Get Paid?

Traditionally, servers would collect cash tips from their customers and pool the money at the end of the day. When they receive a paycheck, their monthly salary would include any tip money along with the mandatory wage from their employer. This way, restaurant owners can gauge their employees’ earnings and deduct or add to their required input.

Since credit cards and digital payments have become more popular, this way of calculating wages has changed. Restaurants input their digital tips and use that information to gauge their earnings. Any cash tips are usually pocketed and left uncounted. This way, servers can still earn more than the minimum.

Do Servers Make Good Money?

By most standards, servers earn less than the national average. Although they can make a decent living by working long hours, their wage is almost entirely dictated by the whims of their customers. Even a quality server working in an expensive restaurant can earn very little if a customer decides not to tip. The only guaranteed tip is if a restaurant includes gratuity.

After including tips, the national average salary for a server is around $15.00 an hour, or $100 a day. Most servers work six-hour shifts, during which time they must run back and forth, carry outside work, and remain standing throughout the day. Some servers will even work double shifts to make extra money.

Should I Tip Servers if it Cuts Into Their Salaries?

This is a difficult question to answer, as it ultimately depends on your personal beliefs.

Some people believe that restaurant owners should pay their servers a livable wage and, as such, tipping should not be encouraged. By tipping, you could contribute to a system allowing restaurants to underpay their staff.

Others believe that servers should be paid minimum wage and that tips are a way of rewarding good service. By choosing to tip your server, you can help raise their earnings above minimum wage and alleviate some of their burdens. Even if you cross the $5.12 tip credit, the server will still earn an additional $2.13 an hour from their employer.

Ultimately, it is up to you to decide whether or not to tip your server. Just remember that, if you do choose to tip, it is always appreciated.

How Do Servers Get Paid in Countries that Don’t Tip?

In countries where tipping is not common, servers are typically paid a livable wage by their employers. This means they can earn enough money to support themselves without relying on tips from customers. Any tips that they do earn go directly to the employee.

In the United States, however, servers are often paid less than minimum wage, expecting to make up the difference in tips. This is not the case in all restaurants, but it is a common practice. As such, servers in the United States often have to rely on their tips to make a living.

Do All States Use the Same Tip Credit?

No, all states do not use the same tip credit. Some states have opted not to use a tip credit at all, meaning that restaurant owners in these states must pay their servers the full federal minimum wage of $7.25. Some states choose to increase the credit.

For example, Arkansas requires restaurant owners to pay their servers $12.80 an hour with a maximum tip credit of just $3.00. This puts servers’ wages above the national minimum wage, and Arizona currently stands as one of the highest paying states for waiters.

Final Thoughts

Although some servers can make above minimum wage by working longer hours and earning more tips, federal law allows restaurants to pay their servers below minimum wage by deducting tip earnings.

The amount that restaurant owners must pay varies from state to state, but, on average, servers in the United States earn about $15.00 an hour. Outside the U.S., this system does not apply.