CashoutGlossary / Direct wage
Direct wage
The hourly pay your employer gives you before tips. In a tipped job it's at least $2.13 under federal law, and higher in many states.
The direct wage, which the DOL calls the cash wage, is the hourly rate your employer pays you itself. Tips come on top. When an employer takes a tip credit, the federal floor for the direct wage is $2.13 an hour, and tips have to bring you to at least $7.25 an hour each workweek.
State law often sets a higher cash wage. In 2026 it runs from $2.13 in states that follow the federal floor, like Texas, to the full state minimum in states with no tip credit, like Washington at $17.13. Your state's numbers are on the tipped minimum wage hub.
Overtime for a tipped worker is figured on the full minimum wage, not the cash wage. Under federal rules, time and a half of $7.25 is $10.875, and after the $5.12 tip credit the cash part of an overtime hour is about $5.76.
A common mistake is reading a low direct wage, or a tiny paycheck, as your real pay rate. Your employer takes taxes on your regular pay first and then the taxes on your reported tips out of the same wages, so a small or even zero check is normal when most of your income is tips. Add tips to your wages to see your effective hourly rate.
Related terms
Tip credit · Tipped minimum wage · Overtime · Tipped employee
