Department of Labor’s Wage and Hour Division resource on minimum wages for tipped employees. In addition, the Economic Policy Institute logs historical minimum and subminimum wages by state with its minimum wage tracker and tipped minimum Payroll for restaurants wage tracker. Confusing tax codes are the root of many preventable payroll tax issues. Make sure that you’re paying taxes for all levels of government that affect you and your employees—including federal, state, and any local tax.
If you are taking a tip credit, your tipped employees will need to report their tips to you on a daily basis in order to ensure proper payment. We’ll break down some of the challenges that restaurant owners face, along with ways to make processing payroll for restaurant employees just a little bit easier. Your payroll needs will vary depending on your business’s size, the benefits you intend to offer, and any specific integrations you might need. If you are already using a point of sale system or payment processing service such as Square or Toast, its payroll option may be the most conducive and cost-efficient for your business.
As we’ve seen, running payroll for restaurant employees has many moving pieces. You have complex legal and regulatory requirements to meet, and must carefully calculate employee wages, tips, and taxes. Performing these steps manually is an invitation to error and hours of tedious data entry. Restaurant365 also offers timely tax table updates, wage garnishment services, overtime pay, and tip-to-minimum calculations.
The best payroll software options for restaurants
Also, even the most basic service level comes with unlimited pay runs. OnPay offers a suite of user-friendly HR payroll and benefits solutions for small to midsize businesses in several industries. It is cloud-based and allows you to finalize payroll for salaried employees, tipped employees, and contractors. Its essential tools include managing paid time off, minimum wage, and employee information.
With it, you get access to features like unlimited pay runs per month, automatic payroll tax calculations, time cards, an employee app, and even live support to help you set up your account. “The consequences of not keeping accurate payroll are having to go back for months or years to make these mistakes right with the employees and government. This often comes with fines as well, and is why nearly every restaurant outsources their payroll. You get the expertise of a company that focuses solely on payroll at a lower cost than hiring someone full time.
Square Payroll Review
For example, an upscale fine-dining restaurant with an elaborate menu will likely have a higher payroll percentage than a fast food restaurant with a simple menu. Most restaurants pay employees every two weeks—either in the form of a check or direct deposit. You can also pay on a monthly or weekly basis depending on what makes sense for your restaurant. The hustle and bustle of a restaurant makes running payroll extremely difficult. Not only do you have to supervise tons of employees with varying salaries, from minimum wage and up, but you also have to factor in tips.
- While payroll software is worth it for the vast majority of restaurants, there are a few small exceptions to this.
- We rated each on a five-star scale designed to assess restaurant payroll services, narrowing our list to the top eight.
- It allows employers to take a credit against their federal income based on the amount of FICA and Medicare taxes paid on tips reported to the employer.
- If you have a limited budget, consider either OnPay, SurePayroll, Square Payroll, or Homebase Payroll, as all these offer reasonably priced plans and unlimited pay runs.
In other states, though, the business purchases a package of workers’ compensation insurance for all of their employees. A third state payroll report that may be mandatory in your area is the business’s workers’ compensation numbers. If you visualize gross pay as a big pile of money, this step (and the previous two) is you removing expenses a few dollars at a time as required by law. To receive a quote, you’ll need to complete a brief form about your business. While there are limited reporting templates, clients can create custom reports to fit their needs. ADP saves me money because I don’t have the tax penalties we were running up.
Homebase Payroll: Best Restaurant Payroll Solution for Hourly Workers
The software will help with payroll taxes, garnishments, and provides an employee self-service portal. It can also provide things like a FICA credit tip report, to help you find tax savings. Paycor offers bundles of business software, not just payroll software. As a result, it offers a lot more than just payroll management, potentially including help with onboarding, a range of analytics options, and other HR functions. There’s really only one tier of service, so everyone gets the same access to Square’s customer support team. Square offers other products for accounting, reporting, and a variety of other functions, but these aren’t included in their payroll software.
The monthly fees for add-ons may grow pricey depending on the add-ons you choose. Take your time to pick the best for you, and be sure to factor in the tax management, self-service, and payment capabilities of each. Restaurant payroll software can be a lifesaver with tools that streamline processes and cut down on unnecessary stress.
Before you begin running payroll for your restaurant, get to know each type of tax, how much it is, when you need to pay it, and the tax agency to remit it to. Determine your pay schedule ahead of time so you know how frequently to pay employees. The cost of labor in a restaurant can vary widely, with payroll usually making up 25% to 40% of revenue. Your payroll system may be able to help you save some money, but if you’re not sure how to do payroll, find an accountant to help. From stocking ingredients to cleaning the floors, there are so many demands when owning a restaurant, let alone a successful one.
Gusto: Best Overall Payroll Software for Restaurants
For example, they can create and file W-2 and 1099 forms automatically, eliminating a lot of hassle and improving accuracy. Since these should be digital files, it’s easy to back up the information and keep it safe. Speaking of safety, remember that payroll information contains sensitive personal information of employees (such as their bank account numbers) and must be kept confidential.
The most popular payroll software is Gusto, and while we don’t pick this as our favorite for restaurants, we can understand why it’s so well-liked. After all, it’s our top pick for the best payroll software for small business. Some of the many reasons we chose it as our favorite general top pick include its fair pricing, scalable plans, comprehensive features, automatic payroll tax administration, and affordable insurance options.
Restaurant Payroll: The Ultimate Guide For Business Owners
Gusto can automatically file your state and federal taxes when the time comes—and sends you automated reminders if tax laws in your state happen to change. The best restaurant payroll software for most people is Gusto or Paycor. Running payroll may not be the most exciting part of running a restaurant, but it’s one of the most essential. It can be intimidating, but by preparing yourself with the right information and tools, you can make it a bit easier.
What ADP does for small business owners is allow us to spend time on marketing to get more business as opposed to doing payroll. You may only need easy-to-use payroll software, or you may be looking for solutions to make other aspects of HR simpler. Whether you’re managing schedules, calculating tip payouts or tracking time across multiple jobs and locations, see how we can help you simplify and streamline your day. Employees that earn less than $20 in tips are not required to report their tips to their employer for that month. However, when the total tips are greater than $20, employees must report tips monthly.
Tracking dozens or even hundreds of shift hours, shift changes, tips, and overtime payments across multiple locations is complicated and time-consuming. Thankfully, there’s payroll software that caters specifically to restaurants. 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.
Wave software is designed for individuals and small businesses that need flexibility and ease managing their finances. It facilitates a fluctuating roster of employees and contractors easily, so it’s an affordable and flexible solution for restaurants with seasonal workers or fluctuating staffing needs. Your restaurant’s payroll may look a little different than another restaurant’s or business’s payroll depending on if you allow tips, have multiple pay rates for different jobs, etc. Consider the advantages and disadvantages of each method of paying employees before making a decision. Ask yourself questions, like Can I afford 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.