Restaurant Payroll | Don't Make These 9 Common Mistakes

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May 31, 2022
Restaurant workers sitting running payroll on a laptop at the end of the shift

As a restaurant owner today, there is a lot you need to stay on top of; from guest experience to the ambiance, operations, and more. But in the end, great people are paramount to running a smooth establishment - and great people expect to be paid on time. Enter restaurant payroll.  

Running restaurant payroll can be tricky when it comes to the restaurant industry - specifically because it requires managing some unique challenges that other industries are less likely to encounter, including:

  • Hourly labor workers
  • Employees working split shifts
  • Employees working overtime due to unexpected rushes 
  • Employee stat holiday pay and overtime pay
  • Employees that have multiple roles, i.e., server and shift leader 
  • Managing labor vs sales metrics and data

This unique employee ecosystem makes running payroll extra tricky, time-consuming, and burdensome. To make this complex process more manageable, restaurant payroll is the solution. 

What is restaurant payroll?

Restaurant payroll is the process of calculating and distributing the compensation (wages or salaries) due to restaurant employees. 

The restaurant industry faces unique payroll challenges due to hourly employees, employees with multiple roles, labor cost management, and employee overtime pay. 

Restaurant businesses are responsible for giving employees the correct salaries/wages while considering payroll deductions such as pension plan contributions, employment insurance, and federal, provincial, or territorial income tax.   

Using restaurant payroll software is a good investment for the business to ensure that employees are paid correctly and on time. 

restaurant payroll software

What are the top mistakes people make when running restaurant payroll?

Given the complex nature of a restaurant's employee management, restaurant owners must have a payroll system that caters to the restaurant's unique needs. 

Restaurant owners without a restaurant payroll system struggle with:

  • Staff not being paid correctly
  • Effective management of employee turnover 
  • Taxes and remittances not being paid  
  • Time theft through punching out-late or buddy punching
  • Disorganized staff schedules 
  • Human error in calculations 
  • Compliance with provincial and federal payroll laws
  • Time and money spent on administrative work

Knowing the consequences that restaurants face when payroll mistakes are made creates a better understanding for restaurant owners of how it impacts the business. 

We are here to share the top mistakes people make when running restaurant payroll and what solutions can be used to mitigate these mistakes. 

The top errors restaurant owners make when running restaurant payroll include: 

1 - Not setting up "positions".

Restaurant staff are typically cross-trained in various positions to accommodate schedule changes, employee unavailability, unexpected rushes, and seasons. An example is an employee working both in the server and shift leader position. 

Despite this constant shift to accommodate business labor needs, restaurant owners need to set up all the positions that their staff work in the restaurant's HR payroll platform. It helps keep a record of what roles each employee works and what they should be paid for each position. 

Restaurant owners can even set up schedules based on roles needed to run the restaurant before considering the people. In this way, the owners can keep an eye on the labor, while maximizing costs and ensuring people are paid based on hours worked in their position.  

2 - Manually calculating restaurant payroll.

With the unpredictable nature of restaurant schedules, it is hard to believe that some restaurant owners still do manual calculations to keep up with the changes. 

Restaurants are non-traditional workplaces that are open seven days a week, staffed by part-time and multi-position employees, working irregular hours and different shift schedules (overtime and split shifts) with breaks and clock-ins. Therefore, it is complex and challenging to keep up with and record the changes manually. 

A manual payroll system is time-consuming and is prone to human error that leaves the restaurant at the risk of payroll errors such as overpaying or underpaying employees, which can negatively impact employee productivity and incur penalty fees. 

Restaurant payroll software can save time and money by automating payroll calculations (stat holiday pay and taxes), completing tax filings, paying government remittances, funneling approved hours to payroll, and paying employees with multiple positions and rates.

restaurant payroll software

3 - Forgetting to factor in overtime.

Working in a restaurant, staff will usually have to work overtime during rush hours and cover for other staff who become unexpectedly unavailable. This makes these employees eligible to receive overtime pay. 

Sometimes restaurant owners can forget to factor in overtime when creating schedules which can cause lost wages. Unfortunately, the business fails to pay the correct wages owed to the employee for all the hours worked. 

The solution to this is to integrate the restaurant's POS system with a workforce management system so the restaurant owner can set up schedules based on forecasts (labor vs. sales percentage), while getting real-time alerts. This solution helps streamline operations and save money through accurate staffing to meet the restaurant's labor needs. 

4 - Doing taxes yourself.

Why would you ever do your payroll taxes by yourself in a world where tax automation exists? But some restaurant owners do.  

Doing taxes yourself is complicated; however, it can be managed using software solutions. For example, restaurant payroll automates tax calculations, including federal, local, and state tax remittances and deductions. The payroll systems also allow staff to easily access their T4s (end of year tax forms) and more, which makes the tax filing process more manageable. In addition to payroll taxes, you must also be mindful of properly filing your annual report.

The automated calculation that restaurant payroll systems like Push has means that restaurant owners can stay on top of tax and remittance compliance without the fear of incurring penalty fees.

5 - Frustrating your staff with poor systems.

There is nothing more frustrating for restaurant staff than not being paid on time, not being paid the correct amount for hours worked, or not being paid directly (direct deposit or cheque) into their accounts. This can negatively impact employee morale, trust, and productivity. 

Frustration with pay can be corrected by using an HR and payroll system that collects and centralizes employee documents and personnel information during the onboarding process. The payroll system can then access the bank information to make payments directly into employees' bank accounts.  

restaurant payroll software

6 - Not offering EWA, aka Instant Pay.

Earned Wage Access (EWA), also known as Instant Pay, gives employees the ability to access their earned pay on-demand instead of waiting for the restaurant's predetermined pay period. 

And while Instant Pay is not a restaurant payroll, it does have a lot to do with how restaurant staff is paid, including prompt payment. The business uses a restaurant payroll system to run and process payroll within minutes.  

Restaurant owners should consider using Instant Pay for benefits such as:

  • Boosting employee retention through Instant Pay platforms like KOHO that provide employees with instant cash back, earned interest on accounts, building a credit history, and money management services. 
  • Differentiating the restaurant from competitors by providing a quick and easy way for employees to access cash while working in a cashless industry. 
  • Making the staff happy by investing in their financial success with access to a pre-paid Visa card and app to pay for financial obligations and manage debt better. 
  • Quick and seamless integration with the existing payroll system.

In addition, there is no downside to integrating your existing payroll software with Instant Pay, as it offers benefits for both employees (instant access to cash and better money management) and restaurant owners (staff retention). 

7 - Using different systems for multi-location restaurants.

The natural trajectory of business growth is an expansion to other locations. However, for restaurant owners, running multi-location restaurants can be an uphill task with the challenge of scaling business operations and managing employees. 

Handling payroll for various locations that are subject to different local, state, and federal regulations, and addressing all the unique requirements without a proper payroll system in place can be formidable for restaurant owners. 

With running payroll for multi-location restaurants, owners are faced with the challenge of:

  • Addressing inconsistent policies that vary from location to location and getting stakeholder buy-in from employees and enforcement by the leadership team. 
  • Relying on old systems like Excel spreadsheets that are not designed to handle an influx of payroll. 
  • Managing more employees comes with more schedules, leave, absences, stat holiday pay, and labor needs. 
  • Non-compliance with government regulations, such as tax obligations and remittances, have to be made based on local, state, and federal guidelines of the restaurant's location. 

As the business grows, the amount of paperwork, employee information, and corresponding records can become unmanageable, which necessitates a restaurant payroll solution to make the process effective, efficient, and less prone to human error. 

To meet the unique needs and challenges of a multi-location restaurant, a payroll system should be flexible, intuitive, streamlined and automated, thus helping to manage the dynamic and complex nature of a restaurant. 

Push, a workforce management system platform, is designed to grow and scale with your multi-location restaurants to automate payroll tax and overtime calculations, manage employee schedules, and meet and track HR compliance. Additionally, it collates and keeps company and employee data into a single source that is safe and private from unauthorized parties and malware. 

restaurant payroll software

8 - Not using an integrated solution.  

Running separate business operations can be a pain for restaurant owners as incorporating them can be difficult, tedious, and vulnerable to human errors. Imagine the chaos of trying to make sense of clock-in-time cards, excel spreadsheets, overtime hours, break times, and changed schedules at the end of a shift. In addition, it would be impossible for a restaurant owner to understand the business thoroughly. 

Therefore, an integrated payroll solution is an essential tool for restaurant owners to invest in to help with managing singular or multi-location restaurants. 

An integrated solution allows restaurant owners to:

  • Onboard employees into the system.  
  • Set up schedules. 
  • Have employees punch in using time tracking software, while receiving alerts when punch-in times don't match with their scheduled times. 
  • Approve clocked hours to process and run payroll. 
  • Get a better pulse on the business by receiving real-time reporting and insights.
  • Manage and store all information for easy record keeping and retrieval. 

In addition, an integrated system allows for employee self service where employees can view their payroll, schedules, and benefits at any time. It promotes a culture of transparency and gives employees quick access to HR related information. 

Using a restaurant payroll that integrates with time tracking, scheduling software, and provides reports and insights empowers owners with the knowledge and tools to make data-driven decisions to improve their business.   

9- Taking more than 10 minutes to run your payroll.

A restaurant payroll system that processes and runs payments in 10 minutes or less! Yes, it's possible, and yes, it could be yours. 

Processing and running payroll quickly for employees is possible with the use of an integrated system. Let us show you how it works. 

Restaurant owners set up schedules that employees use and clock in when their shift starts. At the end of the shift, time tracking software indicates the time and number of hours an employee worked (overtime hours included) and is then approved by the manager. Then, when it is time to process payroll, the employee-approved work hours and shifts are funneled through automated payroll systems to provide the correct compensation and taxes due. This process takes only a few minutes, saving time and money for restaurant owners. If you want to know more about running efficient restaurant payroll, you might be interested in these 10 tips to save you 10 hours!

So why consider restaurant payroll software? 

Running a restaurant is challenging because of its fast-paced, dynamic, and unique nature. Therefore, restaurant owners need to invest in software tools and technology to run one or multiple locations successfully. 

The common mistakes we have mentioned above happen when we rely on manual systems to manage payroll with numerous variables and calculations to consider. 

However, this momentous task can be made quick, accurate, and accessible by investing in an integrated restaurant payroll software system that handles scheduling, time tracking, and runs payroll in 10 minutes, saving time, money, and extra labor. 

Running payroll can be easy and mistake-free with the right payroll system. Talk to us about revolutionizing your restaurant's payroll system today. 

Want to learn more tips to increase your restaurant's profit margins? Download our free guide below! 

restaurant payroll software

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May 2022


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