Chicago, IL: First Steps Towards Phasing Out Tip Credits
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APPLIES TO Employers with Tipped Employees in Chicago, IL |
EFFECTIVE July 1, 2024 |
QUESTIONS? Contact HR On-Call |
Quick Look
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Discussion
On October 6, 2023, the Chicago City Council voted to eliminate the subminimum wage for tipped employees working in Chicago by 2028, entitled the “One Fair Wage” ordinance. The Ordinance covers employees working within the geographical boundaries of Chicago, regardless of their immigration status or the location of their employer. As of July 1, 2024, the minimum wage in Chicago is $16.20 and the minimum cash wage is $11.02. Effective July 1, 2024, Chicago also takes its first step towards phasing out the subminimum wage tip credit. The minimum cash wage paid to tipped employees will continue to increase year over year as the tip credit is decreased, as follows:
- July 1, 2024 – 32% of applicable minimum wage;
- July 1, 2025 – 24% of applicable minimum wage;
- July 1, 2026 – 16% of applicable minimum wage;
- July 1, 2027 – 8% of applicable minimum wage;
- July 1, 2028 – 0% of applicable minimum wage;
By July 1, 2028, the standard minimum wage rate will apply to all employees, including those in occupations that customarily receive tips. Those employees will still be entitled to earn and retain their tips in addition to the standard minimum wage. Under the Ordinance, Chicago’s tipped employees have the right to file complaints with the Office of Labor Standards.
Action Items
- Update payroll practices for compliance with applicable tip credit allowance.
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