Local mandates may include requirements about predictable pay, regular scheduling, or employee breaks. Because of the strict regulations around payroll, you need to make sure that you spend time and resources properly calculating and distributing payroll to your employees. Calculations for tipped wages, overtime, withholding, and deductions are all based on gross pay for your employees and governed by federal, state, and local regulations. Calculating your restaurant payroll depends on accurate data about employee hours worked and schedules.

At the state level, there are often laws that build upon the FLSA, and some cities even have local laws that do the same. Form 940 is a payroll report submitted annually that law firm bookkeeping indicates federal unemployment tax (FUTA) paid during the year. Federal unemployment tax does not come out of your employees’ paychecks but is paid directly by your business.

Tax Resources

Run payroll on any device with taxes, compliance & reporting built-in. Employers and/or employees can apply to the IRS for a lesser percentage, but it will never be reduced below 2%. If the tip income reported by the employees is less than the estimated amount, the employer must allocate the excess amount among the employees.

Note that some compliance regulations vary from state to state, including things like credit card processing fee deductions from tips. In states where permitted, an employer can generally deduct a processing percentage from the employee’s tip. SurePayroll is a web-based payroll service well suited for small businesses of all types, including restaurants. Justworks is a robust solution for payroll and people management, which makes it a pricier option than many competitors.

Tips

Gusto also makes it easy for employees to dedicate a portion of their paychecks to charity, and Gusto Wallet is a full-service bank account that lets employees access their paychecks earlier than payday. When it comes to overtime, it’s really important that you know your state’s laws. If the law for overtime is anything over 40 hours in a week, then you can probably work someone four days at 10 hours per day. But if the overtime law says overtime kicks in anytime you work someone over eight hours per day, you owe overtime. Direct their deductions towards health insurance premiums, retirement funds, and so on. For example, an employee may want $300 of each paycheck put into their employer-sponsored retirement fund, $250 put towards their health insurance premium, and $25 put into their flexible spending account.

If employees don’t earn enough tips to reach the minimum wage, then the employer is required to pay them the difference. Note that state minimum cash wage and maximum tip credits may differ and certain states prohibit tip credits. Your restaurant employees receive tips as a portion of their wages, and depending on what state you live in, you are allowed to pay them less minimum wage than other employees earn, thanks to the tip credit. However, some states require restaurant business owners to pay their employees the same minimum wage as other workers, so be sure to check your state laws. There are several considerations when deciding on the best restaurant payroll software for your establishment.

Time & Labor

This timing is not usually favored by employees, as it leaves them to rely on one check each month. Having employee portals as a feature is more than a bonus, and we recommend looking for payroll software with them. An employee self-service portal allows members of your team to access their payroll information. It’s a convenient solution that will enable them to feel more involved. All of the tools reviewed in this guide are solid options to consider.

When figuring his final pay for the week, don’t forget to calculate in any tips earned, which will determine whether you need to add an additional amount to his paycheck. Because Sharon’s tips weren’t enough to make up the difference between the two wages, you will need to add an additional $39.44 to Sharon’s paycheck to make up the difference. Listen in to hear me break down what the most successful restaurant owners do to run restaurants that make money and give them personal freedom. If you would like to learn more about the importance of systems and how to run a restaurant, read our free special report, Is Your Food Distributor Screwing You? Be sure to visit my YouTube channel for more helpful restaurant management video tips.

The main factors in your decision are whether its core features will meet your requirements and how you currently manage payroll, tip income, and cash tips. FreshBooks seamlessly integrates with the easy-to-use payroll app Gusto to bring you automatic federal government tax filings and payments, HR tools, a payroll schedule, and much more. It also integrates with Square Payroll and other top accounting software programs, including SurePayroll, for accurate books and easy automated payroll processing during a set pay period. As we’ve seen, running payroll for restaurant employees has many moving pieces.

• Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services.
• This often comes with fines as well, and is why nearly every restaurant outsources their payroll.
• Unless your business is in California, Nevada, Oregon, Washington, Montana, Minnesota, or Alaska, you will need to be sure to calculate wages properly.
• For a full list of payroll and POS software companies that integrate with 7shifts, check out our integrated partners page.
• All of the tools reviewed in this guide are solid options to consider.
• Whether you keep it in house or outsource to payroll software, understanding the basics of payroll allows you to make the best decision for your staff and management team.