Let's be honest. You didn't get into the restaurant business so you could run payroll. But payroll is an unavoidable part of doing business. And if you don't do it right and don't pay attention, you could held liable.
Watch this video, or continue reading below, for three things you must know when it comes to restaurant payroll.
About Managing Restaurant Payroll
Normally I like to talk about making money, but in this case I want to talk about payroll. I want to help you stay out of hot water. The last thing you want is an audit, but the truth of the matter is as a restaurant owner, you're probably going to get audited for labor at some point. I want to help you make sure they don't find anything.
First, let's talk about how to manage your cash flow. Cash is what pays the bills, not profits, so it's important to have consistent and reliable systems for managing cash flow. One of those areas is how you set up your accounting and payroll schedule. All too often, restaurants are doing monthly accounting - meaning their books cover one month at a time - and paying employees every other week. Because there aren't 48 weeks in a year but 52, that means you have two extra pay periods every year. U
Inevitably, that extra payroll is going to come at the worst time of year for you. (nless you're on 13-period accounting - then bi-weekly payroll works perfectly.)
To avoid the hyperventilating session that comes with that extra payroll and to help you plan better, I want you to change to semi-monthly payroll. That means you pay two times per month - your pay periods are 1-15th, paid on the 20th and then 16-last day of the month and paid on the 5th the following month. That means those two payrolls fit perfectly in your monthly accounting. That is your labor and covers everything that happens in that month, including overtime.
That also means every month you have two payrolls. The checks you cut will be slightly higher, but you won't have an extra payroll ever.
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. Make sure you're calculating your overtime properly.
Work with a payroll company. That's really important. Especially when it comes to making sure you're paying overtime in the correct job code. Sometimes you have an employee who has multiple positions and makes different hourly wages by position. For example, a server and a server trainer could easily be the same person. You want to make sure the higher-paid wage is correctly paid. Some companies do a weighted average and that's an approach that is great for a payroll company.
The last thing is to understand tip credit. The tip credit states are disappearing. A tip credit says you can pay a server, a tipped employee, as low as $2.13/hour as long as they get tips that take them over minimum wage in that shift. There are adjusted tip credit states where they pay more than $2.13/hour, but still not minimum wage.
Here's where you get in trouble. If you're in a tip credit state, you have to pay overtime at minimum wage. If your sales are really slow during a specific shift, and you have a server working at the tip credit wage, and the tips don't cover the hourly wage, then you owe them minimum wage.
These are all important things to understand because you want to make money, but you also need to make sure you're not opening yourself up to vulnerabilities.
A payroll company can really make all of this so much easier!
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? 5 Things You Can Do Now to Lower Food Cost. Download it here. Be sure to visit my YouTube channel for more helpful restaurant management video tips.
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