Indiana Tipping Laws & Regulations (2026)

Federal FLSA Compliance

Indiana follows the federal Fair Labor Standards Act (FLSA) for tip law. As of 2026, Indiana has not enacted a state-specific minimum wage above the federal floor of $7.25 per hour, meaning all employers in Indiana must comply with federal wage and hour rules.

Tip Credit Rules

Indiana allows employers to claim a tip credit of $5.12 per hour (based on federal rules), provided that:

• The employee receives tips that, combined with the $2.13 base wage, equal or exceed $7.25/hour
• The employee is customarily tipped (servers, bartenders, cocktail servers, bussers)
• The employee is informed of the tip credit amount in writing before employment begins
• Tips are properly documented and reported
• If tips fall short in any pay period, the employer must immediately make up the difference

Tip Pooling Regulations

Indiana allows pooled tip arrangements, following federal FLSA guidelines:

• Tips may only be pooled among employees who are customarily tipped (servers, bartenders, bussers, food runners)
• Non-tipped employees (kitchen staff, dishwashers, hosts in some situations) cannot participate in tip pools
• Managers and supervisors cannot take a share of tips unless they regularly perform customarily tipped work
• The tip pool must be reasonable and transparent
• Employees must be informed of the tip pool arrangement in advance

Make-Up Wage Requirements

A critical compliance point often overlooked by Indiana employers:

• If an employee's tips plus the $2.13 base wage don't equal $7.25/hour in any pay period, the employer must immediately pay the shortfall
• This "make-up wage" must be paid in the same pay period or immediately thereafter
• Failure to pay make-up wages can result in wage and hour violations
• Gratuity Solutions automatically calculates and applies make-up wages in real-time

Overtime Rules for Tipped Employees

When calculating overtime for tipped employees:

• Overtime is calculated on the full minimum wage ($7.25), not the reduced tipped wage
• Tipped employees are entitled to 1.5x the full minimum wage for hours over 40 per week
• This means overtime pay of $10.875 per hour (1.5 x $7.25)
• This is a frequent compliance error in Indiana hospitality operations

Record-Keeping Requirements

Indiana employers must maintain:

• Daily tip records for each employee claiming tip credit
• Documentation of the tip credit policy provided in writing to employees
• Proof of any tip make-up payments when tips fall short
• Records of tip pooling or sharing arrangements and distributions
• These records must be kept for at least 3 years per federal law
• Indiana Department of Labor compliance audits can trigger reviews of these records

Neighboring State Context

Indiana shares borders with Ohio, Michigan, Illinois, and Kentucky. Each has different wage laws:

• Ohio: Follows federal FLSA ($7.25), but has higher state minimum wage ($11.00 as of 2026)
• Michigan: $10.33 state minimum wage with different tip credit rules
• Illinois: $14.00 state minimum wage with no tip credit allowed
• Kentucky: Follows federal FLSA ($7.25) like Indiana