Payroll Facts Restaurant Owners Must Know and Understand

Dealing with payroll requirements in a restaurant can be complex. For example, you will need to figure out the specific regulations that are applicable for tipped employees of the restaurant. Then you can make sure that they receive a proper compensation for the work they offer. Let’s learn more about the payroll requirements that restaurants will have to adhere when dealing with tipped employees.

Minimum wage and the tip credit

The Fair Labor Standards Act (FLSA) permits employers to deduct tips from the required minimum pay for tipped workers. Although the federal minimum wage is now $7.25 per hour, tipped workers can get as low as $2.13 per hour if their hourly income plus tips equals the federal minimum wage. For tipped workers, certain states have higher minimum pay rates.

Understanding tip pooling

Tip pooling is the practice of tipped workers contributing a percentage of their gratuities to a pool that is subsequently shared among many workers. Tip pooling can be mandated by employers, but it must adhere to specific FLSA rules. Only workers who often get tips, such as waiters, bartenders, and bussers, can participate in tip pooling. Cooks and dishwashers are examples of non-tipped personnel that employers cannot put in the tip pool.

Getting service charges from customers

Some restaurants add service fees to customer bills. These fees are subsequently given to the staff members who provided the service. Service fees, on the other hand, are not regarded as gratuities and are not eligible for the tip credit. If an employer gives service charges to staff, it must be made clear to the client that this is not a tip and that the service fee is being given to the staff.

Record keeping

Restaurants are required to maintain accurate records of all tips given to staff members, including cash tips and tips made using credit cards. Additionally, employers are required to maintain a record of the quantity of tips that each employee reported to them each pay period. This data is used to determine the tip credit and make sure that workers are being paid fairly.

Reporting all the tips

Employers are required to disclose employee tips to the IRS after which employees are required to do the same. Even if they don’t be paid for that pay period, employees are still obligated to disclose any tips they get. On Form 941, which is used to record federal payroll taxes, employers are also required to declare the tips.

Final words

As you can see, restaurants employing tipped staff can have complicated payroll procedures. To maintain compliance and prevent fines, it’s essential to understand the rules regarding tip credit, tip pooling, service costs, record keeping, and reporting tips. To guarantee that employees are properly compensated, restaurants must have a payroll system that can precisely compute the tip credit and monitor employee tips. Restaurants can provide their workers a fair wage and stay in compliance by adhering to these rules.