Restaurant payroll presents a particularly tricky challenge because of the complex laws governing employees who earn income through tips. Also, restaurant owners must keep records of how they determined wages for at least two years. This includes time cards that comply with FLSA timekeeping requirements.

If you plan on allowing your workers to receive tips, familiarize yourself with tip reporting requirements. Consider the advantages and disadvantages of each method of paying employees before making a decision. Ask yourself questions, like Can I afford payroll for restaurants to pay employees using this method? Like with payment schedules, you also need to review payment laws (e.g., direct deposit laws by state) to make sure you are compliant. The easiest way to maintain proper records is by using payroll software.

Who’s Considered a Tipped Employee?

It’s a good fit for a small business that expects or hopes to grow into a large enterprise because you can easily migrate to its enterprise solutions. If you already use QuickBooks for accounting, Payroll is an ideal add-on. If you don’t already use QuickBooks, you might find a lower-cost option for payroll administration.

• It’s, therefore, essential to check if local minimum wage requirements exist where your business is located that may override the federal requirements.
• Keeping track of different wages isn’t unique, but there are more complications for restaurants.
• The best restaurant payroll software can handle fluctuating staffing levels, tips and time tracking in addition to basic payroll runs and taxes.
• The form is due to employers by the 10th of the following month, and employees can face penalties if they do not report tips to their employer as required.
• For salaried positions, like managers, gross pay will be the same every pay period, determined by their annual rate.
• Switching to a digital onboarding process, such as ASAP Payroll Service’s Evolution software, can save you significant time each year.
• We then translated that point system into an easily digestible 5-star rating.

Once you’ve sorted out wages, another one of the big restaurant payroll costs to consider is overtime pay. For example, if you’re leaning toward using payroll software for restaurants, do your research to determine how to choose a restaurant payroll provider. In addition to payroll tax reports, some states require restaurants and other businesses that operate within their borders to submit unemployment tax reports as well. As the name suggests, this restaurant payroll report provides information to your state’s reporting agency about the amount of tax your business withheld from employee paychecks.

What is restaurant payroll?

That is your labor and covers everything that happens in that month, including overtime. Restaurants can run payroll through payroll software as with any other business. However, you need to make sure to use a payroll service that makes it easy to account for tips if your staff receives them https://www.bookstime.com/ as part of their compensation. Forbes Advisor analyzed 15 factors to organize this list of the best restaurant payroll software. Based on those factors, each payroll provider could score a total of 100 points. We then translated that point system into an easily digestible 5-star rating.

Get unlimited payroll runs, automated tax filing and payment, W-2 and 1099 filing and integrations with accounting and human resources (HR) software. Errors with reporting tipped wages are also a common way that restaurants get into tax trouble. The employee is responsible for tracking and reporting tips to the IRS as income. Tipped workers must make at least the state minimum wage after tips, or else you, the employer, have to supplement their earnings to make up the difference. Check out the guide from the IRS for all the rules and regulations surrounding employee tips.