What a restaurant pay stub shows
Tipped pay has more moving parts than an hourly wage, so each part gets its own line. The sample on this page is a server's weekly stub with every line below.
| Line | What it is | Paid in the check? |
|---|---|---|
| Hours at the cash wage | Tipped hours × the cash wage, $2.13 or your state's rate | Yes |
| Hours at the full rate | Non-tipped work, such as a shift as a cook, at the full minimum wage or more | Yes |
| Overtime | Hours over 40 in the week, worked out on the full minimum wage | Yes |
| Card tips | Tips customers added on a card, paid out through payroll | Yes |
| Cash tips reported | Cash tips the employee reported to you | No, already received |
| Service charges | Mandatory charges paid out to staff: these are wages, not tips | Yes |
| Taxes | Federal income tax, Social Security and Medicare on all of the above | Taken off |
| Cash tips already received | The reported cash tips again, so net pay isn't inflated | Taken off |
Federal law doesn't require a pay stub, but most states require a wage statement each payday, and some name the lines it must show. Check the state where the restaurant is before you settle on a layout.
The tip credit: $2.13, $5.12 and your state
Under the federal Fair Labor Standards Act, an employer can pay a tipped employee, someone who customarily and regularly gets more than $30 a month in tips, a cash wage of $2.13 an hour and count up to $5.12 an hour of their tips towards the $7.25 federal minimum wage. That $5.12 is the tip credit. If tips don't make up the difference in a week, you pay it.
Before taking the credit, the Department of Labor says you must tell the employee the cash wage, the tip credit amount, that the credit can't exceed the tips they actually get, that all tips are theirs except through a valid tip pool, and that the credit doesn't apply unless they were told.
| Where | Minimum wage | Most tip credit | Cash wage |
|---|---|---|---|
| Federal (and states such as Texas) | $7.25 | $5.12 | $2.13 |
| Illinois | $15.00 | $6.00 (40%) | $9.00 |
| Alaska, California, Minnesota, Montana, Nevada, Oregon, Washington | State minimum | None | Full state minimum |
Source: U.S. Department of Labor, Fact Sheet #15 and the state tipped minimum wage table dated 1 July 2026, read on October 8, 2026. State and local rates change, often on January 1; check your state's labor department before you set a rate. This page is general information, not legal or tax advice.
Overtime for tipped employees
Overtime is worked out on the full minimum wage, not the cash wage. Federal regulation 29 CFR 531.60 says a tipped employee's regular rate includes the tip credit. With the federal figures, an overtime hour is 1.5 × $7.25 = $10.875, less the same $5.12 tip credit: $5.755 in cash wages.
| Line | Hours | Cash rate | Amount |
|---|---|---|---|
| Server hours | 40.00 | $2.13 | $85.20 |
| Overtime | 5.00 | $5.755 | $28.78 |
| Cash wages | 45.00 | $113.98 |
Tips above the tip credit don't go into the regular rate. Mandatory service charges do, because they are wages.
Tips, withholding and the cash tip offset
- Employees report cash tips to you by the 10th of the next month when they reach $20 or more in a month, IRS Publication 15 says.
- Reported tips are wages for federal income tax, Social Security, Medicare and FUTA. You also owe the employer share of Social Security and Medicare on them.
- You withhold from wages and other funds the employee gives you, never from the tips themselves. When wages run short, withhold in this order: tax on regular wages, then Social Security and Medicare on tips, then income tax on tips.
- Large food and beverage establishments may have to allocate tips and file Form 8027. Allocated tips aren't withheld on.
That is why the cash tip line appears twice. It goes into gross pay so the taxes are right, then comes off as "Cash tips already received", because the server took it home on the night. Card tips paid through payroll stay in net pay.
The 2025–2028 tips deduction doesn't change any of this: it is claimed on the employee's own return. What it changes is the 2026 Form W-2, which shows reported cash tips in box 12 with code TP and the occupation code in box 14b.
Tip pools, service charges and card fees
- Employers, managers and supervisors may not keep any part of employees' tips. A manager may keep only tips customers give them directly for service they provide themselves.
- If you take a tip credit, a mandatory tip pool can include only staff who customarily and regularly get tips, such as servers and bartenders. If you pay the full $7.25 cash wage, cooks and dishwashers can be in the pool too.
- A compulsory charge, such as 18% on large parties, isn't a tip. Paid out to staff, it is wages and goes on its own earnings line.
- You may take the card company's actual fee off a card tip, for example 3%, as long as it doesn't take pay below the minimum wage.
For the federal records, 29 CFR 516.28 asks you to mark each tipped employee in the pay records and keep the tips they report, the tip credit you take, and their hours in tipped and non-tipped work. A stub with those lines separated keeps the records and the employee's copy in step.
How to make a restaurant pay stub
- Get the week's figures from your payroll: hours at each rate, card tips paid out, cash tips reported, service charges and each tax withheld.
- In the pay stub generator, enter the hours at the cash wage, then use "Add earnings line" for overtime, card tips, reported cash tips and any service charge payout.
- Add the tax lines, then a deduction line "Cash tips already received" for the reported cash tips. Check that net pay matches the check you paid.
PayDocs works out federal income tax, Social Security, Medicare and supported state taxes for 2026 pay dates (see what we calculate). PayDocs doesn't track tips over the month, apply a tip credit, or check pay against the minimum wage; it turns your payroll figures into a clear stub.
A PayDocs pay stub records a real payroll payment. It is not proof of income, and nobody should present one as such.
Questions
What should a restaurant pay stub show?
Hours at each rate (the tipped cash wage and any non-tipped work), overtime, card tips, reported cash tips, service charge payouts, each tax withheld, a line taking the cash tips back off, and net pay.
Why are cash tips added and then subtracted on a pay stub?
Reported cash tips are wages for tax, so they go into gross pay and the taxes are worked out on them. The server already has the cash, so the same amount comes off again and net pay is only what you actually pay.
What is the tipped minimum wage in 2026?
Federally, $2.13 an hour in cash, with up to $5.12 of tips counted towards the $7.25 minimum wage. Many states set more, and Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington allow no tip credit at all.
How is overtime calculated for tipped employees?
On the full minimum wage. At the federal rates an overtime hour is 1.5 × $7.25 = $10.875, less the $5.12 tip credit, so $5.755 in cash. Tips above the credit don't change the rate.
Are service charges tips?
No. The Department of Labor says a compulsory charge, such as 15% of the bill, isn't a tip. If you pay it out to staff, it is wages: its own earnings line, taxed like wages and counted in the overtime rate.
Does no tax on tips change what goes on the pay stub?
No. The deduction is claimed on the employee's return, so tips are still withheld on. It changes the 2026 Form W-2, which reports cash tips in box 12 with code TP.
Sources
- U.S. Department of Labor — Fact Sheet #15: Tipped employees under the FLSA
- U.S. Department of Labor — Minimum wages for tipped employees (state table)
- eCFR — 29 CFR 531.60, Overtime payments (tipped employees)
- eCFR — 29 CFR 516.28, Tipped employees and employer-administered tip pools (records)
- IRS — Publication 15 (Circular E), Employer’s Tax Guide
Official sources checked October 8, 2026. This guide explains how pay documents work; it is not tax or legal advice.
