TRENTON, NJ — A newly introduced bill in the New Jersey Assembly would phase out the tip credit for restaurant and other tipped workers by 2030, requiring employers to pay the full state minimum wage regardless of tips received.
Key Points
- Assembly Bill 5433 would eliminate the tip credit in stages through 2030
- Tipped workers would gradually receive the full minimum wage from employers, without tips counting toward it
- The bill impacts restaurants, salons, and other industries where tipping is common
Sponsored by Assemblywoman Verlina Reynolds-Jackson (D-15), Assembly Bill 5433 proposes a five-year rollback of the tip credit currently allowed under New Jersey’s minimum wage law. The tip credit permits employers to count a portion of workers’ earned tips toward satisfying the state’s minimum wage requirement.
Under the bill, the tip credit—now $9.87 per hour—would be reduced incrementally each year starting in 2026: $7.90 in 2026, $5.92 in 2027, $3.95 in 2028, and $1.97 in 2029. It would be eliminated entirely beginning in 2030, requiring employers to pay tipped employees the full hourly minimum wage in cash.
Industry changes anticipated
The change would bring tipped workers’ base pay in line with other minimum wage earners in New Jersey. This would affect a wide range of service industries, including restaurants, bars, salons, and hospitality venues, where employees often rely on tips to supplement low hourly wages.
The bill amends Section 5 of New Jersey’s 1966 minimum wage law, eliminating a longstanding practice that has faced criticism from labor advocates who say it leaves workers vulnerable to unpredictable income and wage theft.
Currently, tipped employees can be paid below the minimum wage, provided their tips bring their earnings to at least the mandated hourly rate. A5433 would prohibit that practice after 2029.
Legislative outlook
If enacted, the bill would gradually restructure compensation models across tipped industries and likely prompt businesses to reevaluate payroll strategies. Supporters argue it ensures fair wages, while opponents in the restaurant industry may raise concerns about cost impacts and job losses.
The proposed legislation takes effect immediately upon passage.