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Illinois Employers – Don’t Take Your Employee’s Tips!

Picture of Heather Palermo Heather Palermo · March 10, 2020

payroll + hr compliance small business accounting business & tax strategy

Effective January 1, 2020, the Illinois Wage Payment and Collection Act has been amended regarding employee tips/gratuities. The law states that gratuities are the property of employees, and that their employers cannot retain them.

“People in the various service industries work hard for their money and in many cases, such as for restaurant servers, tips make up an important part of the overall compensation,” said Michael Kleinik, Director of the Illinois Department of Labor. “This law leaves no doubt that gratuities belong to the workers who earned them.”

The law requires gratuities to be paid to employees within 13 days after the end of the pay period during which the gratuities were earned; otherwise it is a violation of the law.

There are exceptions under the law.

Employers can withhold gratuities paid by credit cards in a proportional amount of any credit card processing fee unless the fee exceeds the tip.
Employees are permitted by the law to do tip pooling among themselves.
The amendments do not change an employer’s allowance for gratuities (40% of minimum wage tip credit) to the extent permitted under minimum wage laws.

Based upon the above, Illinois employers should be careful in paying tips to their employees.

Workers or employers who have questions regarding the Illinois Wage Payment and Collection Act can call the Illinois Department of Labor at 312-793-2800 or email DOL.Questions@Illinois.gov.

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The information in this article is provided for general educational purposes and reflects conditions as of the publication date. It is not legal, tax, accounting, payroll, HR, or compliance advice. Every business is different, so talk with a qualified professional about your specific situation.