Best payroll software for restaurants and tips for small businesses
- You may need a restaurant payroll guide to navigate the ins and outs of the unique restaurant payroll process.
- Restaurant payroll is unique in that you need to calculate tip credits and might use a different minimum wage than other businesses.
- Homebase helps make restaurant payroll easy by automating your process, so you can pay your team in a matter of clicks.
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Restaurant payroll best practices
Restaurant payroll management looks a little different than it does in other small businesses. While you still need to cover the basics like setting up your Employer Identification Number, payroll forms, and payroll schedule, you also need to consider extra restaurant-specific financial reports like what your employees earned for the month in tips, tip credits, and more.
Your restaurant employees receive tips as a portion of their wages, and depending on what state you live in, you are allowed to pay them less minimum wage than other employees earn, thanks to the tip credit. However, some states require restaurant business owners to pay their employees the same minimum wage as other workers, so be sure to check your state laws.
You may also be subject to local Department of Labor rules that require a higher minimum wage than your state rate. Check with your local government before you start calculating average labor costs, and once you calculate that with your food costs and other operational expenses, you can get a better view of your prime costs.
Once you’ve got your minimum wage rate set, you’ll also need to implement a method for tip reporting. If you are taking a tip credit and paying your employees less than the standard minimum wage rate, make sure your employees are reporting their daily tips, both from cash and credit card to you after each shift so that everyone gets paid correctly.
You must also follow these steps if you’re paying restaurant employees at a reduced rate:
- First, collect timesheets, calculate gross pay
- Gather tip reports from every tipped employee
- Subtract reduced minimum wage from required minimum wage
- Calculate due taxes, like Medicare, Social Security, and federal income tax based on your employees’ wages and tip income
It’s important to keep records of all reported tips for every employee to ensure proper tax payments and avoid any risks should the IRS audit you.
It’s complicated to run payroll for restaurants each pay period. Using payroll restaurant software to help you cover all your bases is a great way to make sure you’re aware of what you’re spending on labor costs and taxes and that you’re fully compliant.
Homebase can also automate your payroll process by calculating wages and tips and processing tax filings for you, whether you’re a fine dining restaurant or a food truck.
Owner at Barzotto
How to choose a restaurant payroll provider
Whether you are looking for the best restaurant accounting and payroll software or a restaurant POS with payroll integrated into it, there are many factors that go into finding the best payroll service for restaurants.
Your restaurant payroll company should make your process easy, accurate, and efficient. Homebase ensures your payroll process is automated, simple, and error-free. We’ll even run payroll summary reports and prevent payroll fraud for you so you don’t have to worry.
You can also find a few employee self-service features that your team can take advantage of, which let them keep track of their payroll information like tips and wages.
What should I look for in restaurant payroll services?
The best payroll service, whether you’re looking for an app for your mobile device or a solution you can use on the computer (or both), your payroll company should prioritize making your payroll process as easy as possible. It should also ensure accuracy and security so you can remain compliant with federal and state laws.
Homebase does all of that and more. We make it easy to run restaurant payroll, leaving you little to worry about.
Another top priority you should look for in payroll software is one that offers great customer service. After all, payroll comes with a plethora of questions, so you need a reliable partner to answer them and help with any issues that may arise. Don’t worry
Homebase also helps you avoid missed breaks, overtime errors, missed clock-ins, and other mistakes that could spark a payroll audit.
Best payroll software for restaurants in 2022
- Homebase – Homebase is a scheduling, time tracking, payroll, and much more software service that focuses on small businesses and restaurants. Over 100,000 small businesses have used Homebase’s services.
- Gusto – Gusto is an HR and payroll service that has been servicing small businesses since 2012.
- Square Payroll – We have all heard of Square, or at least used their payment processing software at one time or another, but did you know Square offers payroll services as well?
Payroll software for restaurants FAQs
1. What percentage should the average payroll cost for a restaurant be?
The restaurant payroll percentage of sales consists of salaried and hourly employees’ labor costs, employee benefits like insurance premiums, payroll taxes, workers’ compensation insurance, restaurant staff training, discounts, and more.
As a general rule of thumb, the average payroll for restaurants should not cost more than 30% to 35% for full-service establishments and 25% to 30% for limited-service restaurants. In terms of management wages, you generally would not want them to exceed 10% of your sales for either type of restaurant.
If you need help with labor cost management, Homebase’s dashboard will give you great insight into how much you can expect to pay in labor costs per shift. We’ll even tell you the weather forecast so you can determine how many employees need to be on staff for the day.
2. Why is restaurant payroll software important?
The most important thing about restaurant payroll software is to keep your employees happy. In order to keep employees happy, they must be paid on time and in the correct amount, usually through direct deposit but not always, this is the essence of the payroll system. Payroll software can help ensure this happens.
3. How do restaurants pay employees?
This depends on the functionality of the business and the restaurant owner’s preference. Some restaurant employees are paid hourly plus tips, while some others (think managers and chefs) are paid a salary. This uniquely complex payment situation is the reason many restaurants use payroll software to help organize the details.