This project is a City Council Priority for the 2026 term.
In 2025, the Colorado General Assembly granted authority to local governments with a higher minimum wage than the state’s minimum wage to modify the tip offset through House Bill 25-1208. City Council is exploring whether to increase the tip offset in the City of Boulder and if so by how much. With this project, City Council is hoping to better understand the needs and perspectives of tipped wage earners and the businesses that employ them.
The tip offset is the amount an employer can subtract from a tipped worker’s hourly wage because that worker also earns tips. This means the employer pays a lower base wage, and tips make up the rest. In Boulder, the tip offset only applies to food and beverage establishments.
This system assumes that part of a tipped worker’s income comes from their employer, and part comes from customers’ tips.
In Colorado, the tip offset is $3.02 unless an eligible local jurisdiction raises that amount.
By law, tipped workers must still earn at least the full minimum wage. If their tips don’t add enough to reach minimum wage, the employer has to make up the difference.
In 2024, City Council voted to increase the minimum wage in the City of Boulder by 8% each year in 2025, 2026, and 2027. For 2028 and beyond, minimum wage increases incrementally by the consumer price index, an economic indicator that accounts for inflation and cost-of-living changes in our region.
Year
| Minimum Hourly Wage | Base wage for tipped employees | Tip offset |
|---|---|---|---|
| 2025 | $15.57 | $12.55 | $3.02 |
| 2026 | $16.82 | $13.80 | $3.02 |
| 2027 | $18.17 | $15.15 (unless the tip offset is increased) | $3.02 (unless the tip offset is increased) |
When City Council voted to increase the minimum wage in 2024, they did not have the authority to modify the tip offset from $3.02.
During the 2025 legislative session, the Colorado General Assembly passed a bill (HB25-1208) that allows local governments with higher minimum wages, like Boulder, to modify the tip offset. City Council has chosen to explore modifying the tip offset as a priority project for the 2026 term.
If City Council decides to raise the tip offset, employers would be able to subtract more than $3.02 from a tipped worker’s base pay.
There are limits, though. Council cannot raise the tip offset so much that workers’ base pay drops below the state’s base wage for tipped employees, which is the state minimum wage minus $3.02.
For example, if City Council had enacted a tip offset for 2026, it could not have been higher than $4.68.
Current system:
If Boulder had raised the tip offset to the highest extent for 2026:
Important: Tipped wage earners must still earn at least minimum wage ($16.82 in 2026) per hour. If tips don’t make up the difference, the employer has to cover it.
On April 2, 2026, City Council will be discussing this project. At that time, city staff will present background information and policy options for the Council to consider. These policy options include:
City Council may decide to further explore all options, take one or more off the table or not to continue this project. Assuming the project moves forward, after a community engagement period, city staff will draft options for ordinances that City Council could choose to adopt to modify the tip offset. Should City Council consider an ordinance, they would likely do so at a meeting in June or July of 2026.
During the spring of 2026, we’ll be seeking community input. We want to hear from tipped wage earners, business owners, and anyone else with lived experience or interest in this topic. Opportunities to engage will be posted on this webpage.
Tip offset (or “tip credit”) is the amount employers of certain tipped employees can subtract from the minimum wage to set a new minimum base wage for tipped employees. In Boulder, the tip offset only applies to food and beverage establishments.
Employers can pay tipped workers a lower hourly wage, expecting tips to make up the difference. But workers must still earn at least minimum wage. If their tips don’t bring them up to that level, the employer has to cover the gap.
Base wage for tipped employees is the minimum wage minus the tip offset. Base wage is paid directly to the employee in their paycheck.
State legislation (HB25-1208) passed in 2025 allows jurisdictions with a higher minimum wage than the State’s to adopt an ordinance that increases the local tip credit, as long as the resulting base wage for tipped workers is not less than the State’s base wage for tipped workers.
