Montana Tipping Laws & Regulations (2026)

Montana Allows No Tip Credit

Montana is a no-tip-credit state. As of 2026, tipped employees must be paid the full $10.85/hr minimum wage, and tips are always earned on top of that wage:

• State minimum wage: $10.85/hr (effective January 1, 2026)
• No tip credit, meal credit, or training wage is permitted under Montana's Wage & Hour laws
• Servers, bartenders, and all other tipped staff receive the full $10.85/hr cash wage regardless of how much they earn in tips
• Tips are gratuities on top of the full minimum wage — never a substitute for wages
• This applies to every FLSA-covered business, which includes most Montana employers engaged in interstate commerce

The Small-Business Size Exception ($4.00/hr)

Montana has one narrow business-size nuance — but it is a sub-minimum wage tied to business size, not a tip credit:

• A business that is NOT covered by the federal FLSA and has gross annual sales of $110,000 or less may pay $4.00 per hour
• This $4.00 rate is a flat minimum wage for very small, non-FLSA businesses — it applies to all of their employees, not just tipped staff
• It is not a tip credit: tips do not "make up" any difference, because Montana does not permit tip credits at all
• Any FLSA-covered business — or any business with gross annual sales above $110,000 — must pay the full $10.85/hr
• If an individual employee is otherwise covered by the FLSA (for example, producing or handling goods for interstate commerce), that employee must be paid the greater of the federal or Montana minimum wage

Determining Whether the $4.00 Exception Applies

To determine whether the small-business exception applies to your Montana business:

• Confirm whether your business is covered by the federal FLSA — most enterprises engaged in interstate commerce are covered and cannot use the exception
• Calculate gross annual sales from all sources (not net profit)
• If gross annual sales are $110,000 or less AND the business is not FLSA-covered, the $4.00/hr rate may apply
• If sales exceed $110,000 or the business is FLSA-covered, all employees must be paid the full $10.85/hr
• Keep documentation of coverage status and sales calculations for audit purposes

Tip Pooling Regulations

Montana allows pooled tip arrangements with clear restrictions:

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

Overtime Rules for Tipped Employees

When calculating overtime for tipped employees in Montana:

• Because Montana allows no tip credit, overtime is calculated on the full $10.85 minimum wage for tipped employees at nearly all businesses
• Tipped employees are entitled to 1.5x the full minimum wage — at least $16.28 per hour — for hours over 40 per week
• For a qualifying small, non-FLSA business paying the $4.00 rate, overtime is still based on that applicable minimum wage — but such businesses are rare
• This is a significant compliance point employers often overlook
• Gratuity Solutions automatically recalculates for overtime compliance based on your business coverage status

Record-Keeping Requirements

Montana employers must maintain:

• Documentation of FLSA coverage status and gross annual sales if relying on the $4.00 small-business exception
• Daily tip records for each employee
• Records showing all tipped employees were paid at least the full applicable minimum wage
• 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

Planning for Business Growth

As your Montana business grows, prepare for potential changes:

• If you rely on the $4.00 exception and are approaching $110,000 in gross annual sales, plan for the transition to the full $10.85 minimum wage
• Reassess FLSA coverage as you expand — becoming FLSA-covered ends eligibility for the $4.00 rate regardless of sales
• Update payroll systems before crossing the threshold or becoming FLSA-covered
• Communicate wage changes to staff well in advance
• Gratuity Solutions can model both scenarios to help with financial planning