Restaurant payroll is a complicated mix of state and federal tax rules and laws, which is why a payroll service is the best option.
In the restaurant industry, payroll is a bit more complicated than simply paying each employee an hourly wage and calling it a day. You have some options in how you handle payroll for your restaurant and employees, but it really comes down to two choices: do it yourself or hire a payroll service. The obvious advantage to calculating payroll yourself every week is that you'll save money, but there are far more advantages to paying a service to do it for you.
Keeping track of tips, service charges, regular wages, tax credits and more can be a complex and time-consuming task. There are several rules and laws to keep in mind, and you must follow the strict guidelines in order to remain compliant.
Depending on the state in which you live and work, the laws about minimum hourly wages vary. States on the West Coast (e.g., California, Oregon, Washington) require employers to pay full minimum wage to every employee, including those who receive tips. The federal tipped minimum wage applies to those in states like Texas, Louisiana, Georgia, among others.
If you're in a state that requires you to compensate for low tips (a server must average the federal minimum wage with tips), you, a restaurant manager or an accountant needs to keep track of every employee's tips and adjust as necessary.
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Tax Rules & Credits
Not all tips are treated equally. Gratuities added automatically for large parties are counted separately from regular tips; they're considered revenue for the restaurant, which means they're considered wages and aren't paid out immediately. They also are taxed differently.
If you offer meals to your servers, this is considered a fringe benefit and can be deducted from the employees' wages. This means the meals aren't taxed – which is helpful for your bottom line.
These are just a few examples of the rules and regulations you must adhere to when you calculate payroll every couple of weeks. Many restaurateurs choose a payroll service to navigate the complicated process.
Why Use a Payroll Service
To stay compliant, you have to keep up with tips, wages, taxes, credits and any changes to regulations. If you don't have the time (with everything else you have to do, you likely don't have the time), you can pay a service to handle it all for you. Most payroll services offer a guarantee that your employees are paid on time, taxes are paid on time and everything reported is error-free – and if not, the company pays for the mistakes, not you.
How to Choose a Payroll Service
First, ask around for a recommendation. You can find a plethora of payroll services but getting a recommendation from a satisfied customer means you're likely to avoid a scam or a company that charges too much.
Once you contact a payroll company you'd like to work with, ask how much it costs. Be sure to ask what the difference in cost would be if you paid your employees weekly versus bi-weekly versus bi-monthly. Ask about hidden fees, too. Will you incur a charge every time an employee signs up for direct deposit? You could request an example of a bill from a restaurant that works with the service so you can see the breakdown of the costs from the payroll service.
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