What You Need to Know About Restaurant Payroll

Restaurant payroll is a little more detailed than typical payroll due to the unique tax, wage and hour laws within the industry. Below we will shed some light on the payroll specifics in the restaurant industry.

Employee Classification

Most restaurant employees are classified as non-exempt, meaning they are covered by minimum wage and overtime requirements. But here is where it gets tricky – it is necessary to ensure that tipped employees are paid correctly in addition to their classification. A non-exempt employee must be paid at least the federal minimum wage. Tipped employees may be eligible to be paid a cash wage of at least $2.13 an hour or up to $5.12. If the federal minimum wage is not met in tips (including the hourly cash wage) per hour, employers are required to make up the difference. Some areas do require higher cash wages. Employers can look to a tipped employees fact sheet by the U.S. Department of Labor to better understand.

Tip Pooling

Tip pooling is also a payroll concern in restaurants. Rather than an individual employee keeping all of the tips he earns, he may be required to contribute tips to a pool, in which all tips from a shift are split between all waitstaff, bartenders and bussers for equal disbursement. It is required of the restaurant owner that he notifies tipped employees of any contribution amount that is required. Additionally, a tip credit may only be taken or the number of tips each employee receives. Some states and jurisdictions do not allow tip pooling.

Benefits and Deductions

Employees in the restaurant industry often receive free or discounted meals during their shift. These benefits are classified as fringe benefits by the IRS and are treated as taxable income for the employee. It is important to include fringe benefits in an employee’s pay.

If you need help keeping track of all of these restaurant payroll rules, we can help! Reach out to us today!