Understanding Restaurant Payroll
As a restaurant owner, you were many different hats. You’re in charge of managing employees, making sure your guests enjoy their experience, and running your business operations. And one of the biggest pains, especially if you are not an accounting professional – is restaurant payroll.
Its crucial for restaurant owners to understand the complexity of restaurant payroll to fully succeed in managing their business. Its different than the average payroll for a corporate office or retail store.
Looking at complexity of the restaurant environment
Restaurants are part of an unique industry. It takes into account a vast amount of employee turnover, multiple positions and wages (tipped wages – yikes!).
The work environment of a restaurant is fast paced, and the busyness of a restaurant is highly dependent on the number of guests and sales.
According to the National Restaurant Association, 14.7 million people are employed in the restaurant industry, and 10% of the United States workforce is made of restaurant employees. And in that 10%, the restaurant industry employs the most hourly and part-time staff.
On average, less than 10% of restaurants employees are salary employees. With a vast majority of people employed as part time staff, the turn over rate is extremely high, and the cost of training and re-training significantly adds up.
Unlike industries like retail, where only 2-4 positions exist (like sales associates and cashiers), the restaurant industry is made up of many different positions within different departments.
Within one restaurant, you’re managing 2-4 departments under one roof. You have the management department, the kitchen department, the support department, the serving department and you may even take it a step further and break them down into hourly and salary sub-departments.
Recognizing the importance of labor costs
Multiple wages and positions is the norm in the restaurant industry and the ability to accommodate different rates is key.
Staff are usually cross trained to work in different positions to accommodate sudden schedule adjustments. This type of training is crucial in maximizing labor costs and answering the disruptive nature of schedule changes. Especially with millennials; events and occasions come up, and shifts are always being switched around.
Most restaurants are open 7 days a week. There’s no regular 9-5 schedule for restaurant management and especially for hourly employees. Most staff are students who don’t have a set schedule or normal work days like office jobs.
Restaurant employees don’t work standard 8 hour shifts. There’s split shifts, and OT shifts, and this, in combination of irregular schedules, results in a lot more tracking of actual worked hours. Its difficult to keep track of who has taken breaks, or who clocked in late, especially with manual methods of pen and paper.
The process of tracking hours is far more complicated. When you employee 50+ employees, its likely that two to three employees will forget to clock in or out. In an industry with a large workforce that’s largely made up of part-time employees, inaccurate time tracking is inevitable. It's impossible for manager to keep track of every single employee working.
If you're a national brand operating in multiple states or provinces, smart scheduling also needs to be taken into consideration as statutory holiday pay can be costly.
Staying on top of employee compliance
Restaurants are highly driven by seasonality. Some months are busier than others; hence staff that were previously listed as part-time can easily be running into full time hours.
This can affect your role as an employer, particularly in the case of the Affordable Care Act (ACA). Making sure you’re on top of benefits for the ACA is highly important as the penalties are ridiculously punitive.
Tracking tips is also important, as some states like Florida, Massachusetts, and Arizona, use tips to make up the minimum wage top off.
- A server makes $2.13 / hour and utilizes tips to make up the difference to minimum wage ($7.30/ hr).
- If staff’s combined $2.13 + tips is under the minimum wage threshold, then the employer needs to top of the difference.
This makes tracking tips crucial. As an employer, you need to ensure staff are reporting accurate tips, especially with cash. You should only be paying employees for their time worked, and inaccurate tracking may result in you over-paying.
Restaurant payroll differs from other industries as it considers different factors like multi-positions, irregular work schedules, and different types of pay (tipped wages vs. minimum wage).
Running a business is hard enough in itself. In the age of technology, the introduction of restaurant management software is quickly making its way into restaurant operations. But it's more than simply finding software to do the work for you. It's about software that carry key qualities of your restaurant's unique needs.