The direct wage (sometimes "cash wage" or "tipped minimum wage") is the per-hour rate an employer must pay a tipped employee, separate from tips received. Under federal FLSA, the floor is $2.13/hour — but this is just the federal minimum. Most states require higher.
State landscape for the direct wage:
- $2.13/hr (federal floor): Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Carolina, Tennessee, Texas, Utah, Virginia, Wyoming
- $2.13 – $5.00: most southern and midwestern states
- $5.00 – $8.00: many northeast and mid-Atlantic states
- Full minimum wage (no tip credit): Alaska, California, Minnesota, Montana, Nevada, Oregon, Washington
The math: direct wage + tips must total at least the full applicable minimum wage. If a Texas server's $2.13/hr × 8 hrs = $17.04 plus $40 in tips = $57.04 total for the shift; minimum wage for 8 hrs at $7.25 = $58. The employer must "make up" the $0.96 difference. Most weeks this never triggers because tips clear minimum wage easily, but employers are required to track it.