Workers in New Jersey’s restaurant industry, particularly those in positions such as servers, bartenders, and delivery personnel who receive tips directly from customers, are always concerned about whether their wages meet legal standards. In addition to federal minimum wage laws, New Jersey employment law has specific regulations regarding wage determination for workers who receive tips, which is a very important matter for workers’ economic stability and occupational rights protection. This column aims to provide detailed explanations of how minimum wage determination works for positions that include receiving tips based on New Jersey employment law, and the legal responsibilities of employers and worker rights protection measures that follow.
- Minimum Wage Laws and Definition of Wages Including Tips
The federal government and New Jersey each operate minimum wage systems, and these laws often complement each other or show differences. The federal minimum wage is $7.25 per hour as of 2025, while New Jersey stipulates a higher minimum wage of $15.49 per hour (effective January 1, 2025).
However, particularly for positions that receive tips, separate regulations exist under certain conditions, based on the principle that tips received by workers are considered part of their wages.
New Jersey employment law stipulates that in calculating wages that include tips, employers must ensure that workers receive at least the legal minimum wage by combining the tips workers receive with their base wages (direct payment wages). In other words, calculating wages that include tips is not simply a matter of adding tips to base wages, but rather based on whether total wages meet the minimum wage or higher.
- Method of Calculating Wages Including Tips
According to New Jersey employment law, workers who receive tips must generally be guaranteed a certain percentage or more of the hourly minimum wage, which is also regulated through the ‘Tip Credit’ system. Tip credit is a method where employers use tips to make up the difference when wages paid directly to workers fall short.
2025 Tip Credit Calculation Standards
- Minimum wage: $15.49/hour
- Employer cash payment obligation: $5.62/hour
- Maximum tip credit: $9.87/hour
Calculation formula:
Total wages = Cash wages + Tips ≥ $15.49
Specific examples:
- Example 1: Cash wages $5.62 + Tips $9.87 = $15.49 (meets minimum wage)
- Example 2: Cash wages $5.62 + Tips $8.00 = $13.62 → Employer must pay additional $1.87 shortfall
Employers must verify that tips received by workers contribute sufficiently to meeting minimum wage requirements, and have a legal obligation to make up any shortfall when tips are insufficient.
Legal Trends: Changes in Tip Credit System
According to Bill A5433 proposed in March 2025, tip credits are scheduled to be phased out starting in 2026:
| Year | Allowed Tip Credit | Cash Wages |
| 2026 | $7.90 | $7.59 |
| 2027 | $5.93 | $9.56 |
| 2028 | $3.96 | $11.53 |
| 2029 | $1.98 | $13.51 |
| 2030 | $0 | $15.49 |
Starting in 2030, the full minimum wage must be paid in cash regardless of tips.
- Definition and Scope of Tips
Tips refer to monetary compensation voluntarily provided by customers, and ownership of tips belongs entirely to workers. Important points include:
- Credit card tips: Employers cannot deduct credit card fees from tips and must pay the full tip amount to workers
- Tip ownership: Tips are the exclusive property of workers, and employers cannot take any portion
- Shortfall compensation: When total wages calculated on a weekly basis fall short of $15.49, employers must compensate for the difference
- Key Employer Obligations
New Jersey law requires employers to pay workers fair wages, and particularly for wages that include tips, there are the following obligations:
4.1 Prior Notice Obligation
Before applying tip credits, employers must notify employees of the following:
- Cash wage amount ($5.62)
- Applicable tip credit ($9.87)
- That tip credit cannot exceed the employee’s actual tips
4.2 Record Keeping Obligation
- Must maintain wage and tip records for 6 years
- Transparent settlement and clear record keeping are essential
4.3 Credit Card Tip Processing
- Tips received via credit card must be paid in full to workers without fee deductions
Workers have the right to check their wage details and tip settlement details at any time, and if unreasonable or unfair deductions or non-payments occur, they can immediately report to the Department of Labor or take legal action.
- Legal Remedy Procedures and Problem Cases
In practice, cases may arise where employers process tip settlements inaccurately, fail to properly reflect tips, or where wages after tip deductions do not meet minimum wage requirements.
Legal Remedy Procedures
- NJDOL complaints: Must file within 6 months from the date of wage theft
- Civil lawsuits: Must file within 2 years (based on oral contracts)
These problems can be resolved by workers reporting to the Department of Labor or through the help of legal experts, and legal responsibility is strictly imposed on employers.
Common Violation Cases
- Failure to compensate shortfalls: When employers fail to pay the difference during weeks when tips are insufficient
- Credit card fee deductions: Illegally deducting card fees from tips
- Missing prior notice: Calculating wages without prior notification about tip credit application
- Record keeping failures: Failure to properly record tip and wage details
Conclusion
Workers in positions that include receiving tips must verify that their wages meet legal standards, and when problems arise, it is advisable to promptly seek legal help.
Particularly, as of 2025, New Jersey’s minimum wage is $15.49, and tipped workers must receive at least $5.62 in cash wages. Additionally, since tip credits are scheduled to be phased out starting in 2026, preparation for these changes is necessary.
New Jersey employment law clearly defines worker rights and employer responsibilities, and with strict reporting deadlines of 6 months/2 years, it is important to respond immediately when problems arise.
If you are experiencing tip-related wage problems or unfair treatment, do not suffer alone any longer and contact Song Law Firm. Issues such as tip credit calculation errors, shortfall non-payments, and illegal credit card fee deductions require swift response. Call 201-461-0031 or contact us at mail@songlawfirm.com.
This column is for reference only and does not constitute legal advice. For guidance on your specific situation, please contact us at 201-461-0031, WeChat: songlawfirm, or email mail@songlawfirm.com to schedule a consultation.
