Operating a restaurant requires the ability to manage a lot of moving parts at once. This statement is not only true when it comes to the day-to-day functions of the business, but also when it comes to handling payroll. The structure of restaurants often presents many payroll issues that aren't typically common in other industries. Learn about some of these differences.
Employee Classification
Primarily, restaurants have two classifications of employees, tipped and non-tipped earners. For the people in the non-tipped employee group, you can follow the standard minimum wage guidelines for your locality. However, those in the tipped group are paid at a different minimum wage rate. If you incorrectly classify an employee while processing the payroll, you will end up with some employees being overpaid (tipped group) and other employees being underpaid (non-tipped group).
Credit Card Tips
Restaurants also have to incorporate credit card tips into payroll processing. Typically, if a staff member is tipped with cash, the money goes straight into their hands and the restaurant has no liability over it. Credit card tips are paid to the restaurant, and then the restaurant adds the earnings to the employees' paycheck. You need to be able to decipher which credit card tips go where. Additionally, in some states, owners are authorized to deduct credit card processing fees from the tipped amount. Both these steps must be followed precisely to ensure accuracy.
Tax Structuring
Tax structuring can sometimes be a challenge for restaurants. Tips are considered earned income, therefore, according to the law, they can be taxed. However, you only have the authority to deduct taxes from the credit card tips you process. As a result, you are required to keep track of all cash tips that your staff receives so that you can report the figure to the IRS, it is then the responsibility of the employee to pay the taxes on this amount. Although this process largely falls on the employees' willingness to be honest, it is still your responsibility to follow up.
Getting Help
Again, to say that operating a restaurant is hard work is almost a bit of an understatement. Why not get help where you can? Payroll processing firms understand the unique needs of restaurants and are equipped to meet and satisfy these needs efficiently. With the help of these services, you ensure your business is handled correctly, but most importantly, that your employees are fairly compensated for their hard work.
Contact a payroll processing firm to learn more about the types of services they can offer your restaurant.
If you're a business owner and you don't have an accountant, you might want to consider hiring one. Accountants help business owners by handling the books, filing tax forms and managing the costs of the business. They also offer guidance to concerning important business matters. We aren't accountants, but we do have an understanding of the importance of their duties.
We've interviewed accounting professionals and they've answered all our questions about their job description and explained how their services can benefit business owners. We've compiled all this information into articles that we've posted on this site. We hope that you will read them to learn how an accountant can benefit your business.