The Payroll Blog

News, tips, and advice for small business owners

Restaurant Payroll 101

Posted On
Stephanie Davis

When you opened your restaurant, you were likely thinking about the menu, pricing, and deals, and what the name would be. What probably didn’t make that list was how you were planning to handle your restaurant payroll.

A man wearing an apron and holding a tablet behind the counter at a coffee shop and two employees standing behind him.

With any business, accurately processing payroll and paying your employees on time and correctly is crucial. Restaurant payroll is a little more complicated than typical payroll due to the unique tax and wage and hour laws surrounding the industry and accounting for tipped employees. Below, we’ll explain some of the specifics related to restaurant payroll and give you insight into how online payroll software can help make the task easier.

Employee Classification

Misclassifying employees can result in payroll headaches. In a restaurant, the majority of your employees will likely be classified as non-exempt, which means they are covered by both minimum wage and overtime requirements.

In addition to exempt and non-exempt employees classification, it’s necessary to pay tipped employees correctly. According to the U.S. Department of Labor, a tipped employee “engages in an occupation in which he or she customarily and regularly receives more than $30 per month in tips”. Non-exempt employees must be paid at least the federal minimum wage, however, employers may be eligible to pay tipped employees a minimum cash wage of at least $2.13 per hour, if the tips the employee earns brings their rate to minimum wage and if the employer follows the FLSA notice requirements. The maximum tip credit is $5.12, which equals the federal minimum wage of $7.25 when added to the minimum required minimum cash wage of $2.13.  If an employee does not meet the minimum wage in tips for the hour, employers are required to make up the difference. Note, some state or local jurisdictions require a higher cash wage, some define tipped employees differently and some do not allow tip credit.

The U.S. Department of Labor offers a tipped employees fact sheet to explain these scenarios further. 

What is tip pooling?

Tip pooling is another subject common in restaurants. Instead of employees keeping all of the tips they earn, they may be required to contribute to a tip pool, in which all tips from a shift get split between all waitstaff, bussers, and bartenders for equal disbursement. As a restaurant owner, you must notify tipped employees of any required tip pool contribution amount, and you can only take a tip credit for the number of tips each tipped employee ultimately receives. State or local laws may or may not allow tip pooling.

Benefits and Deductions

In the restaurant industry, it’s common to give employees a free meal during their shift, or giving a meal discounted while they are working. Benefits like these are classified by the IRS as fringe benefits, and they will be treated as taxable income for the employee. When running payroll, it’s important to include any fringe benefits you offer in your restaurant in the employee’s pay.

How Online Payroll Software Can Help

If payroll for your restaurant was not top of mind when opening your business, you might be wondering where you can find some help keeping track of all these rules. At SurePayroll, we are equipped to handle your restaurant payroll needs. In addition to understanding the restaurant industry inside and out, we also provide restaurant specific benefits that other payroll software may not offer, including:

  • Minimum Wage Alerts to stay compliant with the minimum wage laws for your state and pay your employees the amount they deserve.
  • FICA Tip Credit Report to help you calculate and track how much you are entitled to claim on your annual tax return.
  • Tip Sign-Off Report which provides you with written proof of employee’s tips received and declared, which will keep you compliant as well.

Additionally, when choosing SurePayroll as your restaurant payroll software, you will have access to:

And of course, all of this is backed by our taxes paid and filed guarantee which means, if you receive a notice from the IRS, or any other tax agency, based on a filing that SurePayroll made for your organization, we’ll work with the agency to help resolve the issue on your behalf.  And, if we’re at fault, we’ll pay all the associated penalties and fines.

If you’re ready to get some help with your restaurant payroll, request a quote today.



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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.