Illinois Tip Pooling Laws Explained
Illinois allows tip pooling but layers real state protections on top of federal law — tips are the employee's property, card fees can't come out of them, and Chicago is phasing out the tip credit entirely.
Illinois permits tip pooling and tip-outs, but the Illinois Wage Payment and Collection Act adds employee protections that go beyond the FLSA — and if you operate in Chicago, the rules are shifting under you. Here are the pieces that matter.
Tips are the property of employees
Since a 2020 amendment to the Wage Payment and Collection Act, Illinois law states that gratuities are the property of the employee. Employers may not keep any part of them, and pooled tips must still end up entirely with eligible workers.
The 60% tipped wage — and Chicago's phase-out
Illinois allows a tip credit: tipped employees may be paid a cash wage of 60% of the state minimum wage (with the state minimum at $15.00 since January 1, 2025, that's a $9.00 tipped wage), provided tips make up the rest. If tips fall short, the employer makes up the difference.
Under Chicago's One Fair Wage ordinance, the city's tip credit began phasing out on July 1, 2024, shrinking by 8% of the city minimum wage each year until the tipped wage equals the full Chicago minimum by 2028. If you operate in Chicago, check the current city rate every July — Cook County has its own schedule too.
Who can share in an Illinois pool
Illinois follows the federal framework for pool membership:
- Taking the tip credit? The mandatory pool is limited to customarily and regularly tipped employees — servers, bartenders, bussers, runners, hosts.
- Paying the full minimum wage in cash? Back-of-house staff may be included.
- Managers, supervisors, and owners are excluded either way — judged by duties, not titles.
Card fees can't come out of tips — and pay them within 13 days
Two Illinois-specific rules trip up operators used to federal law:
| Credit-card processing fees | Illinois does not allow deducting the processing fee from an employee's card tip. The full tip amount must be passed through — unlike the federal rule. |
|---|---|
| Payment timing | Gratuities must be paid to employees within 13 days after the end of the pay period in which they were earned. |
Illinois compliance checklist
- Pay card tips through at 100% — never net out processing fees.
- Pay out tips within 13 days of the end of the pay period.
- Track the correct tipped wage for your location (state vs. Chicago vs. Cook County).
- Limit mandatory pools to tipped roles while taking the credit; exclude managers always.
- Keep written distribution records for every shift.
With three overlapping wage schedules in one state, consistency and records are your best defense. Divvy applies one written formula everywhere and logs every payout. See the federal guide for the baseline, or compare no-tip-credit states like California and Nevada.
Frequently asked questions
Is tip pooling legal in Illinois?
Can Illinois employers deduct credit-card fees from tips?
How quickly must tips be paid out in Illinois?
Is the tipped wage different in Chicago?
This guide is general information, not legal advice. Tip laws change and vary by state and city. Verify current rules with the U.S. Department of Labor, your state labor agency, and a qualified employment attorney before setting your tip policy.