The Chicago City Council has decided to delay the phased elimination of the tip credit, a move that affects many local businesses and their employees. In a decisive 49-1 vote, the council established new timelines for the gradual reduction of the tip credit, providing a reprieve for small and larger businesses alike.

Revised Timelines for Employers

For businesses with three to 20 employees, the permitted tip credit will remain at 24% through June 30, 2030. It will then decrease to 16% from July 1, 2030, through June 30, 2031, followed by 12% from July 1, 2031, through June 30, 2032. The credit will further reduce to 6% from July 1, 2032, through June 30, 2033, before being completely eliminated on July 1, 2033.

For larger employers with more than 20 employees, the tip credit will remain at 24% through June 30, 2028. It will then be reduced to 16% from July 1, 2028, through June 30, 2029, and to 8% from July 1, 2029, through June 30, 2030. The credit will be eliminated entirely on July 1, 2030.

Impact on Local Businesses

This decision by the city council is significant for local businesses, particularly in the hospitality industry, where tip credits are a common practice. By extending the timeline for the elimination of the tip credit, the council aims to provide businesses with additional time to adjust to the changes, potentially easing the financial burden on employers and preserving jobs in the process.

The phased approach reflects a balance between the city’s goals of ensuring fair wages for all workers and the economic realities faced by businesses. As the new timelines take effect, businesses will need to plan accordingly to accommodate the gradual reduction in the tip credit.

Original reporting: NFIB (National Federation of Independent Business) — read the source article.