Restaurant payroll taxes are different from other types of payroll taxes. To calculate restaurant payroll taxes, you need to take into account several factors, including the minimum wage and tipped wage rates in your state, the total amount of tips received by your employees during the pay period, and more.
It's essential to maintain payroll tax compliance for restaurants to avoid penalties and ensure that you're treating your employees fairly. If you're a restaurant owner or you handle payroll for a restaurant, using the right payroll solutions can simplify your work. Here's what you should know about managing payroll effectively for restaurants.
Setting Up Payroll
Setting up payroll is the first step to maintaining compliance. Your business will need an EIN and state tax ID number, completed employment forms for all your employees (including the I-9 and W-4), a complete payroll schedule, and a separate bank account for paying employees and their taxes. Familiarize yourself with the payroll schedule laws in your state to ensure that you're in compliance when you establish your restaurant's payroll schedule.
Restaurant Payroll 101
In most states, tipped employees are not paid the basic minimum wage. Instead, they are paid a minimum wage specifically for tipped workers. The federal minimum wage is $7.25, while the minimum wage for tipped workers is $2.13. Your state may follow the federal minimum wage or may have its own minimum wage amounts.
Some states require tipped workers to be paid the same minimum wage as non-tipped workers. It's important to know the rates that your state has established. Also, keep in mind that some cities also have local minimum wage requirements. You'll need to be aware of all of this as you set up payroll for your business.
Keep Tip Records
All restaurant employees will need to report their daily or monthly tips, depending on whether your business is taking a tip credit. Keep copies of all reported tips for your records, just in case there's a dispute with one of your workers or your business is audited.
What to Know About Tipped Wage
Tipped employees must make the minimum wage, either with tips or without. If your tipped employees aren't making minimum wage by combining their tips and the hourly rate your business is paying them, then your restaurant will need to pay them the difference. This is another reason why keeping records of tip amounts and how much your business is paying your workers is important.
Have a Policy for Managing Tips
There are different ways to manage tips in a restaurant. Some restaurants pool tips and share them based on the roles of everyone in the restaurant. For example, servers may keep a certain percentage of tips, while bussers keep a lower percentage. Some restaurants allow employees to keep their own tips.
Know the laws in your state for tip management, particularly if you require tips to be shared between all employees. Maintain consistency among employees and have a written policy to ensure everyone knows how tips are managed.
Manage Your Restaurant Payroll
Calculating payroll taxes in the restaurant industry can be a complex task, but it can be managed efficiently with the right tools and knowledge. The accuracy of payroll calculations is crucial to maintain compliance and avoid legal issues and financial penalties. If you need personalized assistance and consultation in this matter, feel free to contact us at Exact Payroll.
You can also explore Exact Payroll services for restaurants or check out our comprehensive Guide to Payroll and HR for the Restaurant Industry for further information.
Have trouble managing HR considerations with your restaurant? Download our Free HR Guide for Restaurants.