Payroll Services for Restaurants

Restaurants bear an extra burden in payroll administration. In addition to dealing with variable wages and high staff turnover, restaurants are subject to the full range of human resource compliance reporting. Faced with these challenges, many restaurant owners take advantage of professional payroll services.

Ordering Out for Payroll Service

Outsourcing payroll is a common strategy among small business proprietors. Payroll companies simply offer the scale, resources, and expertise to meet the reporting and regulation requirements of payroll preparation.

Restaurants stand to benefit especially from an experienced third-party payroll service. Some of the unique payroll challenges facing the food service establishment include:

• Tip reporting
• High turnover and new hire reporting
• Minimum wage requirements
• Variable hours, overtime, and pay rates
• HR compliance reporting such as OSHA (Occupational Safety and Health Administration)

Together, these features pose a challenge to restaurant owners--many of whom are small proprietors whose expertise favors menu preparation over payroll preparation.

Payroll Services for Restaurants

Many payroll companies offer specialized service packages for restaurant clients. Special payroll services for food service businesses include:

• Shortfall Report. This report monitors employee wages to ensure that the funds are sufficient to cover employee taxes and voluntary deductions. If the wages fall short, the system automatically recovers the employers overpayment in the next paycheck. With wages and hours varying from week to week, shortfall reports ensure that the employees pay their fair share of income tax.
• FICA Tip Credit Report. The FICA tip tax credit can be a source of substantial business tax savings. The payroll service tracks the restaurants matching portion of FICA paid on tips in excess of minimum wage on a per period, monthly, quarterly, or fiscal year basis. This report enables businesses to claim the FICA tip tax credit. According to payroll service leader Paychex, the FICA tip tax credit can save businesses hundreds of dollars per employee each year.
• TEFRA Allocated Tip Reporting. Tip reporting helps restaurants meet their Tax Equity and Fiscal Responsibility Act (TEFRA) obligations. Payroll services offer a range of methods for monitoring reported tips, including allocated tip reporting. This entails calculating tip allocations and reporting the information on tax paperwork such as W-2 forms and Form 8027.
• Form 4070 Sign-Off Sheet. Some payroll services offer this sheet as a means for the restaurant to maintain written proof of employee tips. The sign-off sheet is part of the larger effort to meet TEFRA tip reporting obligations.
• Minimum Wage Requirements. An automated payroll system can ensure that wages and reported tips conform to federal minimum wage and tips-to-minimum requirements.

Restaurants face more than their share of payroll administration hurdles. Complicated regulations governing tips and wage put restaurant proprietors at high risk of compliance penalties. Like most small business entrepreneurs, restaurant owners lack expertise in tax reporting regulations. Payroll services have the resources to negotiate payroll preparation, tax withholding, and reporting obligations on their behalf, leaving restaurant owners to do what they do best: prepare the menu and attract new customers.

Sources

Empire Payroll (PDF)

Paychex