The 11 Most Common Payroll Questions, Answered

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Josh Redford
June 20, 2022
restaurant payroll

Restaurant ownership and management come with many responsibilities, including the daunting restaurant payroll. Whether you're new to restaurants or looking to dive in feet first, we're here to help.

After all, understanding the complexities of payroll is half the battle. That's why we've compiled the most common restaurant payroll questions and answered them all. Hopefully, after reading through this article, you'll be able to run a smoother payroll at the end of each pay period.

We'll take a look at the 11 most common restaurant payroll questions, including:


  1. What is restaurant payroll?
  2. How do restaurants run payroll?
  3. How do restaurants calculate tips in payroll?
  4. What is HR and payroll?
  5. How do multi-location restaurants manage payroll?
  6. How do restaurants calculate payroll?
  7. Who does restaurant payroll?
  8. How do you calculate payroll for staff who work the same day?
  9. How does EWA, or Instant Pay, work with restaurant payroll?
  10. What is the easiest way to run a restaurant payroll?
  11. What is the best restaurant payroll software?

Keep reading to learn more about navigating the complex waters of restaurant payroll.

1  - What is restaurant payroll?

For employees to be paid wages, restaurant payroll must be run each pay period. On behalf of its employees, every restaurant is responsible for calculating the payroll and ensuring their employees are paid correctly.

Countless payroll deductions and other industry-specific laws make restaurant payroll particularly challenging. When running payroll for their restaurants, businesses must be mindful of the different laws surrounding tipping and scheduling of employees.

2 - How do restaurants run payroll?

You'll be responsible for setting up your payroll as a restaurant owner or operator. Most commonly, you'll find one of two options for running payroll.

Manually running payroll.

Especially in the beginning, most restaurants will process their payroll manually. Because it seemingly saves you money in upfront operational costs, processing your own payroll is often appealing to new business owners.

Unfortunately, due to the complex nature of restaurant payroll you'll quickly find that, while processing payroll manually can save you money on paper, it actually costs you more over time in terms of wasted hours and costly errors.


Outsourcing payroll.

The alternative to running payroll manually in your restaurant is to outsource it. You can outsource your payroll to an accountant or restaurant payroll software.

Although there are costs associated with outsourcing your restaurant payroll, you can rest assured that your employees will always be paid correctly and on time. Another added benefit of outsourcing your payroll is that, since you'll be relying on payroll experts, you are more likely to stay on top of your payroll regulations and tax laws.



3 - How do restaurants calculate tips in payroll?

All restaurants must create a tip reporting system to properly calculate payroll. To ensure appropriate payment, your tipped employees must report their tips to you. All tips must be reported, including cash and credit.

Tip credit.

If you are running on a tip credit, all employees must report tips daily to be able to run restaurant payroll properly. In this system, you can include gratuities within minimum wage calculations. Whether you can do tip credit will depend on your state laws.

The Fair Labor Standards Act (FLSA) requires you to provide tipped employees with the following information if your restaurant is in a state where tip credits can be taken:


  • Wage amount (no lower than $2.13 per hour)
  • Maximum tip credit that you as an employer can take ($5.12 per hour)
  • Tip credit taken cannot exceed tips the employee earns
  • Wages paid to all employees must meet the minimum wage requirement (otherwise, the employer will make up the difference)
  • Federal law bars employers from deducting any breakage or register shortages from employee wages
  • Overtime is calculated based on the standard minimum wage minus the tip credit

Monthly tip reporting.

If your restaurant does not run on tip credit, you will need to require tipped employees to report tips to you monthly. In case of an IRS audit or an employee complaint, you must retain a copy of all reported tips.

4 - What is HR and payroll? 

Restaurants are fast-paced businesses that require the assistance of supporting departments. In some larger-scale restaurants, a human resources (HR) department can assist with the needs of various functions in the operation, including:


  • Compliance
  • Performance management
  • Recruitment
  • Payroll


The perfect recipe for a restaurant's success comes from the knowledge of industry practices and experience as well as HR expertise. Of course, not all restaurants are privy to an HR department running their payroll on their behalf. In some instances, restaurant owners or managers are required to handle that responsibility in addition to the day-to-day operation.

As you can imagine, this can quickly overwhelm them and take them away from their more pivotal role in the restaurant. That's why it's important to take a look at your operation and decide what responsibilities should be handled by whom.


5 - How do multi-location restaurants manage payroll? 

Restaurants with multiple locations are faced with even more challenges when it comes to managing payroll. Restaurant payroll in these situations is run in one of two ways.

In some instances, individual restaurants will be responsible for running their own payroll. Typically, a store manager will handle the payroll and all the nuances it demands.

Alternatively, other multi-location restaurants will have one individual responsible for the payroll of all of the locations. An HR department can often be helpful in these instances.

But, as previously mentioned, not all restaurants have the luxury of relying on outsourcing payroll responsibilities to another department. Sometimes, a general manager or regional manager may be the one required to handle all of the payroll. 


In these instances, payroll software can be incredibly helpful. Stay on top of your daily punches, schedule requests, and all things payroll related with the help of this critical restaurant payroll tool.

6 - How do restaurants calculate payroll?

To figure out how to calculate restaurant payroll, we'll take a look at a real-life example. In this example, our restaurant is in a state that allows for a reduction in the minimum wage or tip credit.
Michelle currently earns $2.13 an hour. She worked 40 hours last week and earned $200 in tips. 


To calculate her check, you would follow these steps:


Step 1 - Calculate hourly wages

40 hours x $2.13 per hour = $85.20

Step 2 - Add her tips to her wages

$85.20 + $200.00 = $285.20

Step 3 - Determine if wages are enough

We next have to determine if Michelle's tips are enough to make up the difference between the federal minimum wage and the tipped minimum wage:

40 hours x $7.25 federal minimum wage = $290.00

Michelle needs to be paid at least $290.00 in order to meet federal minimum wage requirements. Since she only earned $285.20, her pay was short.

$290.00 federal minimum wage earnings - $285.20 actual earnings = $4.80

Step 4 - Adjust accordingly

Because Michelle's tips weren't enough to make up the difference between the two wages, the employer will need to add an additional $4.80 to Michelle's paycheck to make up the difference.


7 - Who does restaurant payroll? 

There are a few different options when it comes to who is responsible for restaurant payroll, depending on the structure of the business. Typically, restaurant payroll is managed by one of the following:


  • Restaurant owner
  • Restaurant general manager
  • Accounting department
  • Human resources (HR) department


Whoever is responsible for the restaurant payroll will then have the option to decide whether to outsource it. In these instances, they will seek out assistance from payroll software to help expedite the process for everyone involved.

8 - How do you calculate payroll for staff who work different positions in the same day?

In order to calculate payroll for staff who work different positions on the same day you will need to rely on EWA or Instant Pay. Keep in mind that, in order to offer these options to your restaurant employees, you will be required to stay on top of your daily payroll needs, including punches, scheduling, etc.

9 - How does EWA or Instant Pay work with restaurant payroll?

Earned wage access (EWA), or Instant Pay, allows restaurant employees to access a portion of their wages before their scheduled payday.

When it comes to restaurant payroll, it's safe to assume that it will be processed every two weeks. In this biweekly calendar payroll system, employees are paid every two weeks for the work from the previous two weeks.

Restaurants can verify the hours an employee works or the amount of income they have earned daily, including non-cash tips for tip-earning positions, through Instant Pay services. Employees will gain immediate access to view and link those wages to their preferred payment method, typically all via the Instant Pay company's provided software (usually a phone app).


Why every restaurant should be offering EWA or Instant Pay.

Not surprisingly, Instant Pay opens doors for restaurant payroll that benefit employees. But that's not all. There are plenty of perks for restaurant owners and managers as well.


Integrates with your existing payroll system.

The technology of Instant Pay has evolved to be able to connect with your existing restaurant payroll system, proving to be one of the most beneficial features of these apps.

Increases staff morale.

Show your staff that you want to help them become more financially successful because you genuinely care about them with an Instant Pay app. With features such as building up a credit history, cashback promotions, and interest rates for savings and spending accounts, you can easily promote better money management within your team.

Sets you apart from competitors.

In an industry that is made up almost entirely of hourly workers who don't get to cash in on salary benefits, having a service like Instant Pay can make all the difference. 


Many restaurant workers aren't able to take cash tips home at the end of the day since the majority of the population that has returned to restaurants still prefers cashless payment methods. To reap the benefits of all their hard work, the average restaurant worker has to wait for their paycheck to come every two weeks. Not with Instant Pay!

Increases employee retention.

One of the most critical ways for restaurant owners to combat the Great Resignation is by providing fantastic working conditions. Now, more than ever, the workforce is scrutinizing employer perks and benefits. With such widespread demand for workers across the globe, employees have the upper hand, which means you need to offer something to them that no one else is doing.

There's no real downside.

There truly is no downside to integrating your existing payroll system with an Instant Pay service that fits your business model. With all of the countless benefits for employees, the results for restaurant owners and operators are nearly limitless.

10 - What is the easiest way to run restaurant payroll?

There is no denying how complex restaurant payroll is. It often demands time and attention that restaurant owners and operators cannot spare. The easiest way to run restaurant payroll is to rely on restaurant payroll software.

When you opt to utilize restaurant payroll software, you can enjoy countless benefits. Here are some of the top reasons restaurants are turning to this technology today:


  • Organization
  • Reduction in time theft
  • Minimize payroll error costs
  • Automation of payroll processing
  • Elimination of paid unworked time
  • More effective scheduling
  • Automation of stat holiday pay
  • Overtime alert notifications
  • Elimination of manual calculations
  • Automation of taxes


11 - What is the best restaurant payroll software? 

With so many different restaurant payroll software options, it can be challenging to narrow down your choices. The good news is that there are tons of additional customizations readily available in software, ensuring you find the best fit for your business.

Restaurant payroll software is not a one-size-fits-all so, before selecting a provider do some research, read customer reviews, and do some internal consultation. 

Make sure you find a payroll software provider that can cover these essential functions:


  • Keep a record of employees' working hours and attendance
  • Provide support and other HR services
  • Set up a means of payment for employees
  • Provide easy-to-comprehend payroll reports and documents to employees and employers
  • Ensure compliance with all provincial and federal laws regarding payroll
  • Handle all payroll deductions, remittances, and taxes

Your restaurant payroll questions, awnsered.

Hopefully, you can see the 11 most common restaurant payroll questions answered and begin to get a better grasp of this time-consuming task. You might decide that integrating a payroll system into your restaurant is the best decision for your business. 

Want to learn more about how to run payroll in Canada? Download our free guide below.

How To Run Payroll

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