COMP NEWS – Chicago’s City Council has voted by an overwhelming majority to phase out the city’s tip credit, meaning restaurants will have to increase their workers wages to the state minimum by July 2028.

Chicago’s City Council voted 36-10 Friday to phase out the city’s tip credit, a move that will require restaurants there to increase the wages they pay tipped workers by 67% by July 2, 2028.

Passage was widely expected after the Illinois Restaurant Association agreed to drop its resistance to the measure in exchange for getting a five-year phase-in. The ordinance had originally called for having restaurants meet the new wage obligations in two years.

In addition to raising full-service restaurants’ labor costs, the phase-out of the tip credit is also expected to widen the pay gap between front- and back-of-house workers, since servers and bartenders will now get at least the same base wage as kitchen employees, plus gratuities.

Currently, a portion of tipped workers’ gratuities can be counted toward the minimum wage they’re due under city law. Employers are required to pay those employees only $9.48 an hour if the workers average at least $6.32 per hour in tips, bringing them up to the citywide minimum wage of $15.80. The difference between the employer’s obligation and the mandated minimum wage is known as the tip credit.

Employers’ direct payment will jump to $10.75 next July, $12.01 a year later, $13.59 as of July 2026, $14.54 the following July and the full minimum wage of $15.80 in July 2028.

To read more about Chicago’s bid to kill tipping credit, click here.

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