If you have tipped employees, you may be eligible to use tip credits when you run your payroll, if your state allows it—and Maryland does!
What Is a Tip Credit?
A tip credit allows employers to pay tipped employees less than the minimum wage, as long as employees receive enough in tips to make up the difference.
This is called a “tip credit” because the employer counts the employee’s tips towards its obligation to pay minimum wage. The reason an employer can take a tip credit is because the employee’s tips brings the employee’s wages back up to the minimum wage, or even higher.
How Are Tip Credits Applied in Maryland?
According to the Maryland Department of Labor, Licensing and Regulation, a tip credit can only be applied if the employee:
- is engaged in an occupation in which the employee customarily and regularly receives more than $30 each month in tips;
- has been informed by the employer about the provisions of the tip credit section of the Maryland Wage and Hour Law; and
- has kept all of the tips that the employee received. This does not prohibit the pooling of tips.
Tip Credit Calculations in Maryland
Tip Credit Calculations for Employers Subject to the Maryland State Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 7/1/16 |
$3.63 |
$5.12 |
$8.75 |
| 7/1/17 |
$3.63 |
$5.62 |
$9.25 |
| 7/1/18 |
$3.63 |
$6.47 |
$10.10 |
| 1/1/20 |
$3.63 |
$7.37 |
$11.00 |
Tip Credit Calculations for Employers Subject to the Montgomery County Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 10/1/15 |
$4.00 |
$5.55 |
$9.55 |
| 7/1/16 |
$4.00 |
$6.75 |
$10.75 |
| 7/1/17 |
$4.00 |
$7.50 |
$11.50 |
| 7/1/18 (Small & Mid-Sized Employers) |
$4.00 |
$8.00 |
$12.00 (50 or fewer employees) |
| 7/1/18 (Large Employers) |
$4.00 |
$8.25 |
$12.25 (51 or more employees) |
| 7/1/19 (Small & Mid-Sized Employers) |
$4.00 |
$8.50 |
$12.50 (50 or fewer employees) |
| 7/1/19 (Large Employers) |
$4.00 |
$9.00 |
$13.00 (51 or more employees) |
| 7/1/20 (Small & Mid-Sized Employers) |
$4.00 |
$9.25 |
$13.25 (50 or fewer employees) |
| 7/1/20 (Large Employers) |
$4.00 |
$10.00 |
$14.00 (51 or more employees) |
Tip Credit Calculations for Employers Subject to the Prince George's County Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 10/1/15 |
$3.63 |
$5.92 |
$9.55 |
| 10/1/16 |
$3.63 |
$7.12 |
$10.75 |
| 10/1/17 |
$3.63 |
$7.87 |
$11.50 |
Overtime Tip Credit Calculations in Maryland
In general, overtime is calculated at 1.5 times the usual hourly wage rate for each hour over 40 hours that an employee works during one workweek. The same tip credit for straight time can be applied to overtime hours.
Overtime Tip Credit Calculations for Employers Subject to the Maryland State Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 7/1/16 |
$8.01 |
$5.12 |
$13.13 |
| 7/1/17 |
$8.26 |
$5.62 |
$13.88 |
| 7/1/18 |
$8.68 |
$6.47 |
$15.15 |
Overtime Tip Credit Calculations for Employers Subject to the Montgomery County Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 10/1/15 |
$8.78 |
$5.55 |
$14.33 |
| 7/1/16 |
$9.38 |
$6.75 |
$16.13 |
| 7/1/17 |
$9.75 |
$7.50 |
$17.25 |
| 7/1/18 (Small & Mid-Sized Employers) |
$10.00 |
$8.00 |
$18.00 (50 or fewer employees) |
| 7/1/18 (Large Employers) |
$10.13 |
$8.25 |
$18.38 (51 or more employees) |
Overtime Tip Credit Calculations for Employers Subject to the Prince George's County Minimum Wage Rate
| Effective Date |
Minimum Tipped Wage |
Tip Credit Allowed |
Minimum Due per Hour |
| 10/1/15 |
$8.41 |
$5.92 |
$14.33 |
| 10/1/16 |
$9.01 |
$7.12 |
$16.13 |
| 10/1/17 |
$9.38 |
$7.87 |
$17.25 |
Gallery Pl.—Chinatown 
