Last Updated:
October 10, 2023

Strategies for payroll and taxes for restaurant owners

Streamline payroll and taxes for your restaurant with expert tips. Maximize profits and save time with effective financial management strategies.
Strategies for payroll and taxes for restaurant owners
Pamela Romano
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The payroll department can be a big challenge for restaurant owners. How much should you pay your employees? Hourly or yearly salaries? What payroll taxes do I need to pay and when? These are just some of the questions that come into mind when thinking about payroll management. Fortunately, there are payroll systems that make it easier to handle these challenges so that you can focus on running your business more efficiently.

In this blog post, we will discuss how payroll systems work and how they help restaurant owners take care of their payroll responsibilities in a way that is fair to all parties involved (i.e., employees).

What is payroll?

A payroll is the list of all employees that are being paid by a single employer. Employees are paid an average base salary as financial compensation for the services they perform. Employees’ salaries can be determined on either an hourly or yearly basis and payroll tax is taken out from the payroll before it is sent to employees (i.e., employer payroll taxes).

What is payroll witholding?

Payroll withholding is the process of deducting a certain amount from each paycheck, which you will use to pay your employees’ income taxes. This means that if an employee has wages at $1000 per week, for example, with payroll withholdings they would typically have about 25% taken out in order to cover federal and state tax payments.

Younger employees may not owe income taxes, but you will still need to withhold payroll tax at a rate of 15%. When an employee reaches the age where they are required by law to pay their own income taxes, this percentage is subject to change.

When calculating payroll witholding, you will need to take a few things into consideration, including the employee’s gross wages. This will be the salary they are paid before any deductions are made. You may also need to take into account the number of allowances claimed on your W-4 form and any additional taxes that may be pertinent to your state or county.

The employee is required to file their federal tax return annually, in order to report any income they have earned and pay the taxable wages that are owed. They will also be responsible for paying their state taxes accordingly, which may differ from your payroll withholdings depending on where you live. If an employer does not withhold enough money from wages or has withheld too much, the employee is still responsible for paying their own taxes.

How to calculate payroll withholding

The IRS provides a pay stub calculator that will make it easy to figure out what your employees should be getting paid and deducting on any given paycheck. It takes into account all of the different variables mentioned above in order to help you meet your obligation as an employer.

Starting to do manual payroll? Take note of these

  1. Apply for a FEIN (Federal Employer Identification Number)
  2. Register all employers (including yourself) and your staff to the state (ensure you register new employees as you welcome them)
  3. Register with EFTPS (Electronic Federal Tax Payment System)
  4. Find a payroll schedule and add new employees according to their skill set
  5. Record payroll totals
  6. Stay informed with restaurant laws and regulations, i.e. taxable income: state income taxes, state and federal employer taxes, federal unemployment taxes, payroll taxes, labor laws, etc.
  7. Look into disability insurance if needed
  8. Reach out for legal advice and tax advice
  9. Offer an employee discount and other employee benefits
  10. Offer flexible hours / schedule

Employee payroll is done in a few steps:

  1. Find out their hours
  • Hourly payroll, calculated on an employee's hours worked and their hourly rate (the total amount you pay your staff for each hour).
  • Salaried payroll, calculated as a payroll period (monthly, bi-weekly, weekly) multiplied by a fixed salary.

2. Find out their gross & net pay

  • Gross pay: calculate the salaries made before any taxes or withdrawals
  • Net pay: calculate the salaries received after payroll taxes and other deductions have been made

3. Find out their total payroll deductions and taxes combined

  • Payroll tax: the total sum of federal, state, and local taxes that an individual or company has to pay on earned income in order to avoid paying more at the end when filing annual returns. Different payroll taxes are withheld by employers for Social Security, Medicare, and FUTA (Federal Unemployment Tax Act) payroll taxes.
  • Total payroll deductions: the total sum of payroll withholdings that an employee has to pay on wages in order to avoid paying more at the end when filing annual returns. The following payroll withholding amounts are taken from paycheck for federal income tax, state income tax, city income tax, and payroll taxes.

Paying above the minimum wage requirements

The minimum wage in North America is roughly $12 per hour. However, many restaurants are paying their employees more than this and there's a good reason for it! If you're going to hire someone that works on your restaurant premises, they should be paid at least as much as what would be considered the "minimum wage" wherever you live.

A good reason for raising wages is because employees have higher levels of job satisfaction, it reduces employee turnover rates, and saves money by not having to constantly train new employees over and over again.

Some restaurants offer more than the minimum wage because it's also a great recruiting tool. If you are a restaurant in a major metropolitan area, and you want to attract quality candidates to work for you, try offering something beyond the minimum wage.

A lot of people will be willing to take a pay cut to work in the restaurant industry since they see it as an opportunity for them to move up in the ranks and eventually become head chef of their own restaurant one day. Giving employees a little bit more money can, of course, show appreciation and make them feel like they're valued employees.

Wage and hour laws

They are complicated and ever-changing, making it difficult for restaurant owners to know how much they should pay their employees. The problem is that there are several different wage laws, including federal law, state law (often called a 'living' or 'minimum wage'), local government ordinances, and collective bargaining agreements depending on where you live.

There are also three primary components of a wage: the base rate, overtime pay, and bonuses.

  • The base rate is simply what an employee earns on a regular shift - it doesn't include any extra amounts they're paid for working certain shifts like nights or weekends. This can either be the minimum wage or the wage set by employers.
  • Overtime pay kicks in when an employee puts in more than 40 hours per week. The extra time they put in is compensated with overtime pay, or at least half of their regular hourly rate.
  • Extra benefits that you might offer employees are bonuses, which can be things like a bonus for working nights and weekends, or yearly sales commissions. These could also include holiday bonuses or performance-related incentives such as employee discounts on food purchases from the restaurant.

Other components of wage:

  • Breaks are unpaid time given to employees in the form of lunch or coffee breaks. In some states, there is also a requirement for paid sick leave, a set number of paid vacation days and public holidays.
  • Liability is one of the most important things that restaurant owners need to do as this protects them from legal responsibility for accidents, injuries, or property damage that may happen while employees are working. In the United States there is no federal law mandating employers to provide accident insurance coverage in any amount and it's only required by state if workplace accidents cause more than $2500 of injury-related costs - this includes medical expenses as well as lost wages.

When employees quit

There are many different things that restaurant owners can do when employees quit. The first thing to do is figure out why the employee quit. If the restaurant owner knows why, it can help them take steps to prevent it from happening again. For example, if the employee quit because of a new job opportunity elsewhere, the owner could offer salary increases or benefits like health insurance and paid time off.

If you have an employee who quit, they are entitled to receive their final pay-check within a week. You can pay your employees with payroll checks or direct deposit. If payroll checks are the preferred payment method, an employee can request that they receive their final pay-check by mail. The payroll check needs to have all hours worked and pay owed for that payroll period included in it. The payroll check also needs to include any payroll deductions that were taken out, like taxes, 401k contributions, or payroll deductions.

Rehiring after a loss of staff

Restaurants that have lost staff and need to hire new employees will likely have a lot of difficulties. To start, it might seem like an overwhelming task to figure out how many people you can afford to be without at any given time.

You might also have a lot of concerns about how to keep the restaurant running at its best. If you're really concerned with keeping your payroll low, what is the point in hiring new employees?

The answer may be that it's not always about saving money on payroll costs. Restaurants are usually open 12 hours a day and some even stay open 24 hours a day. If you're open for 24 hours, then having restaurant workers during those extra 12 hours is crucial to keeping your business up and running smoothly!

This will depend on the restaurant but most payroll systems have payroll calculators that can help with this process. They ask questions like how many people are needed at any given time of the day, how many hours they need to work, and what the payroll is. The payroll calculator will automatically calculate payroll taxes, overtime rates, and give you a payroll schedule.

Competitive wages, but what else?

There are a lot of other things that restaurants can offer to their staff in addition to competitive employee wages. The first step is to have payroll taxes taken out of an employees pay check. Payroll taxes are worth the effort because payroll taxes can change depending on how much somebody makes which may result in higher payroll costs for the restaurant owner if payroll taxes aren't factored in.

Some restaurant owners also offer health and dental insurance. This will depend on the restaurant and what they offer with their benefits package but it's important to remember that having a good benefits package is just as important as competitive wages, especially if you want quality candidates when hiring for positions within your restaurant.

Benefits programs can be a great way for restaurant owners to show appreciation for their employees. It's important for restaurant owners to show their employees that they care about them as people. Working in the restaurant industry is also hard work and people need to be compensated for their efforts.

One way that payroll systems can help with this process is by offering benefits programs to employees like health insurance, dental insurance, 401K plans, bonuses for years of service at a company, or paid time off.

Tipping staff

Restaurants owners can offer their employees a fair salary and profit sharing opportunities. When payroll taxes are deducted, the restaurant owner makes less money than they would like to make in order for their staff members to get paid fairly. Therefore, it is important to be aware of payroll tax laws before you start paying your workers so that there won't be any payroll tax penalties.

Employees who earn at least $30 per month in tips must be paid a cash wage of no less than $18 per hour (based on a 40-hour workweek). Tips are usually distributed at the end of each payroll period. For example, if a payroll period is 20 days then tips will be allocated to staff on day 21 or 22.

Some restaurant owners have the tendency to skimp on payroll taxes and pay their employees a lesser cash wage. They want to avoid payroll tax payments by paying as less as possible, but this is the most costly thing they can do because these are mandatory contributions that must be paid on behalf of an employee.

Rules and regulations around tipped employees vary by state, but payroll systems can help calculate the amount of tipped employees and what their final taxable income should be.

For example, if someone's tips are lower than $20 an hour for a full shift or they don't get any tips at all then restaurant owners need to pay them minimum wage in addition to whatever money was made from tips during the shift.

It's important to remember that payroll taxes are mandatory for these employees and payroll systems can help calculate how much they need to be paid in addition to tips. So, if an employee made $100 from tips during a full 12 hour shift then payroll calculators will automatically determine the payroll tax amount owed at the end of the week.

Other types of tips:

A tip can come from many sources: a credit card, cash, or even an item traded at the point of sale. If you are unsure about how to record tips as income for your business, it is important to keep track of all types of customer payments that are not designated as "gratuities" on the credit card receipt, and in the restaurant's computers.

  • Credit card tips: If a tip is left on the credit card, restaurants typically keep it.
  • Tipped out: If employees are paid less than minimum wage and tipped out to other staff, this money should not be counted as part of their tips for tax purposes because they have already been included in wages.
  • Tip pooling: This practice requires that all servers share their tips and is sometimes unlawful in some states.
  • Tip sharing: This practice requires that all employees share their tips, but it can be lawful if the employer pays them at least minimum wage or higher.
  • Non-tip income: Restaurant owners should also consider other types of non-tip incomes they may receive from the customer such as a gift card or a refund.
  • Tip credit: Tip credit is important as it delineates the difference in hourly employees, tipped employees and non-tipped payroll. Tip credits are not only determined by federal minimum wage, but also by the size of a restaurant's payroll.

Employee payroll tax

Restaurant owners need to deal with payroll taxes. These are similar to taxable wages since they consist of the employee's Social Security, Medicare, and unemployment insurance taxes that employers must withhold from their employees' wages and deposit with the IRS on a monthly or quarterly basis. When payroll systems calculate these payroll taxes (or "Withholding Taxes"), they make sure to take into account any payroll tax exemptions for restaurant owners who now have to pay payroll taxes.

Calculating payroll taxes

Payroll taxes are an unavoidable part of running a restaurant. You can calculate payroll tax due by using the Federal Insurance Contributions Act (FICA) payroll taxes calculator.

In the US, payroll taxes for Social Security and Medicare are calculated at a combined rate of 15.30%. The employer pays half, or the total amount of payroll tax is the same as for FICA. The employee pays their half by making payroll deductions from their pay-checks.

Additionally, the payroll tax rate is usually around 10 to 15 percent of the restaurant's revenue.

For example, if your monthly gross sales are $200,000 and you have 12 employees on payroll at an average salary of $20 per hour (or 75% FICA wages), that equals to 2400 hours for a month which comes out in 720 workdays. The payroll tax rate therefore is 720 x .15% = $108.00 for that month in payroll taxes alone.

Restaurant labour cost formula

Prime costs for wages paid to employees by a restaurant can include payroll tax rates such as Medicare and Social Security deductions from compensation or gross payroll amounts. The payroll tax rate will depend on how much an employee earns during their payroll period.

For example if a restaurant payroll cost is $40,000 and the payroll taxes are $3500 then the prime cost would be $34,500. Restaurant payroll tax rates will depend on the payroll frequency and payroll system used by a restaurant, for example if an employee is paid monthly then their payroll tax rate would be 30%.

Employee Salary Formulas:

  • Hourly wage - Payroll taxes = Payroll costs
  • Payroll costs - Payroll tax rate (%) = Hourly wage
  • Hourly wage x (180 days/year) = Yearly employee compensation

Fast food restaurant average labor costs: Less than $14 an hour which equates to less than $30,000 a year for full-time staff with benefits.

Full Service Restaurants are typically larger than fast food restaurants because there is more staff involved in running them; this means that payroll expenses are higher too. Full service restaurants payroll tax rates are typically more expensive than fast food restaurant payroll taxes.

  • Full service restaurant average labor costs: $11.50 per hour plus tips, or about $22,000 a year for full-time staff with benefits.

The payroll taxes that are included in payroll costs include:

  1. Social Security Tax - 12.40% of wages up to $127,200 per year and Medicare tax on the same amount ($2100)
  2. Federal Unemployment Insurance (FUTA) - 0.08% payroll tax
  3. State Unemployment Insurance (SUTA) - 0.06% payroll tax for employers in Minnesota, Maine and New Jersey while other states vary from 0.00% to 0.24%.
  4. FICA taxes are accounted via payroll systems by the employer on behalf of their employees as a percentage of wages up to $127,200.
  5. State unemployment tax is paid by employers of all sizes in every state, and federal payroll taxes are owed on wages up to $127,200 per year.

Tax dilemmas

Taxes are complicated, especially payroll taxes. You're not just dealing with payroll and income tax but also other payroll-related expenses like Social Security contributions or Medicare. There are a few general rules to make sure you don't mess up on the payroll side of things:

  • Make sure your employees know their tax status in regards to filing tax returns
  • Pay payroll taxes quarterly or monthly and always on time to avoid penalties for late payments
  • Take care of payroll tax obligations in advance, such as your Social Security contribution at the end of each year even if you don't owe much in payroll taxes that quarter or month
  • Employer matching contributions should be deducted from payroll taxes, such as payroll-to-payroll transfers
  • Know the payroll tax obligations for federal and state payrolls

Establishing a payroll schedule

A payroll schedule includes the working hours and days of employees, what they should be paid per hour or day (i.e., hourly salary vs. annual salary), and how often you want them to get their paycheck (i.e., weekly, bi-weekly, monthly). This payroll schedule should also include any overtime hours that each restaurant employee can work. This can be done using payroll software or relying on more of your time to crunch the numbers.

A payroll schedule looks at the payroll tax rates, the number of hours an employee works per week, and payroll taxes. The payroll taxes are then multiplied by the number of hours that employee has worked in a week.

For example, let's say you have an assistant who earns $15 per hour and they work 40 hours over four days (Monday-Thursday). This equals to $600 for the week ($30 x 80), which is subject to payroll tax withholding at $600.

$30 x 80 payroll tax = $2400 payroll taxes for the week

Now, let's say that same assistant works over time during one of those days (Friday), and now has 45 hours worked in a week instead of 40 hours. That employee would need to be paid an extra $20 per hour for their overtime hours. This would be $25 x 45 payroll taxes, which equals to an additional payroll tax of $1150 ($30 x 180).

Equitable scheduling

Creating a fair schedule for payroll can be tricky if you have different locations or a lot of employees. This is where payroll systems come in handy, helping restaurant owners create equitable schedules without all the extra time, costs, and stress!

Employees should be scheduled based on their availability, with each shift assigned at least one employee so it doesn't leave shifts unfilled. In addition, payroll systems can easily calculate how much an employee should be paid per hour or day based on the number of hours they work.

Payroll tax vs Income tax

Payroll tax is the money that a company pays to the government for taxes so payroll tax is a cost for the business. Payroll tax used to be called payroll deductions.

All payroll taxes and payroll deductions have to be done through a payroll system with some type of payroll software. Payroll taxes are deducted straight away from your paycheck so it's easier to pay them because you don't need to think about it or remember it each week. They are usually deducted from employees' paychecks whereas income taxes are deducted from employees' paychecks by employers and then sent to the IRS.

Income tax is money that you owe to the government when you earn a certain amount and it's calculated based on your income. Income tax is deducted based on your pay. It is also when an employee has taxes taken out of their pay-checks which are paid by an employer.

Payroll paperwork

The payroll paperwork that should be completed for payroll systems are the time sheets. These documents show how many hours each restaurant employee has worked and what they were paid per hour or day (i.e., hourly salary vs. yearly payroll). The payroll system then takes these numbers, calculates any payroll taxes owed based on your payroll schedule, and makes sure payroll taxes are paid on time.

In payroll systems, the payroll paperwork is typically processed through a payroll software or payroll service provider that has an automated system for calculating tax rates and providing reports to show you what has been done with your restaurant employees' payroll information. This can save you much of the headache from determining how much each employee should be paid, what payroll taxes need to be paid, and how often.

Alternative: Payroll software

As a restaurant owner, you need to consider how much time you have and what payroll services are most appropriate for your business before selecting the right payroll provider or system. A payroll software is usually best if you plan on running payroll yourself because it will save you hours of work in calculating payroll taxes from scratch.

If you are short on time or payroll services is only a part of your restaurant's responsibilities, an external payroll service such as ADP may be more appropriate for your business because it handles the complicated payroll calculations while also providing payroll compliance reporting and automated payments to employees. It will cost more than running it yourself but gives restaurant owners much more time to focus on other important tasks.

With payroll software, the restaurant owner is able to enter payroll information once and have it automatically calculate payroll taxes for different withholding tables. This saves the restaurant owner a considerable amount of time that can be spent on other important tasks.

There are two types of payroll systems typically used by restaurant owners: those run internally and those run externally.

When you have an internal payroll system, the person in charge is responsible for calculating payroll taxes and payroll amounts, which can be done manually or with the help of payroll software.

With an external payroll system, restaurant owners are given a payroll company to handle their payroll responsibilities. They will take care of calculating payroll taxes and determining how much each employee should get paid per hour or day and the frequency in paying them. They will also take care of payroll reporting compliance with the appropriate federal or state agency for payroll taxes that restaurant owners must pay.

External payroll systems are more expensive than internal payroll systems because they require a subscription from an outside company who manages all payroll-related responsibilities. However, payroll systems can offer restaurant owners a lot of benefits that internal payroll systems cannot provide:

  • Payroll taxes calculated accurately on the restaurant's behalf (Payroll taxes are usually the same for everyone, regardless of whether they are a hourly or salaried employee)
  • Payroll compliance reporting made easy for restaurants with all outside company handling it
  • Automated payments to employees so that restaurant owners need not worry about late or missed pay-checks

Top payroll softwares

1. OnPay: One of the most popular payroll software providers, OnPay offers a payroll program that is designed to simplify payroll management tasks for employers. It is very user-friendly, as it calculates payroll taxes and other benefits on behalf of restaurant owners can help with calculating employee salaries as well. It has payroll tax tables, payroll reports, and payroll statistics that can be used by restaurant owners to keep track of their payroll.

2. SurePayroll: SurePayroll offers payroll software that is similar to Onpay with some additional features, such as integrated payroll tax reporting. It can also calculate overtime pay and has an option for payments only on payday instead of the more traditional bi-weekly or monthly payroll cycle. It also has payroll tax tables, payroll reports, and payroll statistics that can be used by restaurant owners to keep track of their payroll.

The main difference between the two is SurePayroll's lack of a management dashboard when it comes to viewing all payroll-related data such as employee information or payroll taxes automatically calculated for each table.

3. Patriot payroll: Patriot payroll is an employee payroll provider for restaurant owners. Patriot payroll offers a fully managed payroll service that automates payment processing and compliance reporting, making it easier for restaurant owners to manage their business while focusing on other tasks.

4. Gusto: Gusto payroll software is offered by a payroll company that handles payroll responsibilities for restaurant benefits and taxes. It follows the traditional payroll schedule of bi-weekly or monthly payroll cycles but allows companies to pay their employees on payday instead, which can save restaurants money since they do not have to wait to receive funds from customers before paying their staff. Gusto also has the most HR add-on options.

5. Quickbooks payroll: Quickbooks payroll software with the easiest online integration. It comes with payroll features for restaurant owners who need to keep track of all payroll-related data such as employee information and payroll taxes automatically calculated for each table. Payroll tax calculations are accurate because they offer different rates depending on whether employees are hourly or salaried. Although, it can be quite complicated to use for someone who has no experience with payroll software or accounting programs, yet they offer tutorials to get things done.

6. Square payroll: Square payroll offers payroll software with a variety of features for restaurant owners. It has detailed payroll reports, payroll tax tables, and information on payroll statistics that can be used by restaurant owners to keep track of their payroll-related data. Square Payroll allows restaurant owners the option to pay employees biweekly or monthly but does not offer an option for payday payments, which is very convenient.

7. Paycheck flex: Paycheck flex payroll software is designed to make payroll management easy and hassle-free, especially for large restaurants. It offers payroll tax tables, payroll reports, and payroll statistics that can be used by restaurant owners to keep track of their payroll-related data such as employee information or the payroll taxes automatically calculated for each table.

Implementing a payroll bank account

A payroll bank account is typically a payroll service that you pay monthly. Payroll bank accounts are an important payroll service for restaurant owners because it reduces the pain of payroll taxes and payroll payment mistakes by doing it automatically for restaurant owners.

Many payroll services offer automatic payroll deposits to payroll bank accounts. This allows restaurant owners to not have to worry about payroll taxes and payroll payments, however even if they are not necessary to conduct payroll, they are highly recommended.

Every time an employee is paid, the money goes straight to their payroll bank account and from there restaurant owners are able to make withdrawals as needed. This gives you more control over how much of your budget will be spent on payroll taxes or whether you can make payroll with a surplus of funds leftover for other needs.

Making payroll payments more efficient

A payroll service is also designed for restaurant owners who want an easier way of making payroll payments. Restaurant owners can use a payroll service's web portal, mobile app, or phone banking system to transfer funds from their checking account into the payroll bank account without having to worry about manually calculating how much needs to be transferred and when it should happen.

These services are typically available at low cost in order to reduce the financial burden on small businesses like restaurants that do not need high-end systems but still need some help dealing with employee payment schedules and processes.

Keeping payroll records

Payroll records are one of the most important parts of a payroll system. When you have payroll reports, it is easy to correct any mistakes that might be made or identify suspicious activity in your restaurant payroll data. If something has happened with payroll taxes and employees' wages on behalf of the employer, employers can contact their state's Department of Labor for more information and help with payroll.

Payroll records should be kept for a period of at least 6 years. This is the length of time payroll records are required to be kept by federal law. Restaurant owners should make it a point to keep payroll reports in case they need them for any reason, such as an audit or legal proceedings.

Setting up direct deposit payroll

What is direct deposit?

One way to make sure you have your paycheck on time is direct deposit. You don't worry about it because the money goes into your account on payday.

It is also called an automated clearing house (ACH) transaction. The information to complete this process includes employee's bank account number, routing number, type of account, bank name and address that are going to receive the payment.

Employees will often use a direct deposit service to claim their paychecks, but the system is also used for several other purposes including tax refunds, retirement benefits, insurance claims and more.

Enrolling payroll employees in direct deposit payroll is another important service for restaurant owners.

Paying employees has been made more efficient over time with the introduction of direct deposits, which are a painless way to pay staff members their wages without worrying about the physical process. Additionally, business owners save about $3 per check when they use direct deposit.

With a direct deposit payroll system you can also set up automatic withdrawals from your business's checking account so that payments are made automatically on behalf of an employer every time there's enough funds available to cover payroll expenses.

This saves restaurant owners the hassle of having to manually transfer money each week or month which can result in unnecessary delays and mistakes with payroll processing if done incorrectly. It also allows employers greater control over how much they want to spend on payroll taxes - whether by reducing how much payroll they have to pay or by offsetting payroll expenses with other income.

Setting up direct deposit for employees

Setting up direct deposit either involves a payroll service, like mentioned earlier, or directly involves your bank, which you will need to contact for more information. Some payroll services can also use information from your bank to transfer funds directly for you.

To set up payroll with your bank, you will need to sign papers and provide financial information to ensure you have enough funds to continue paying your employees. The bank will help you find the right frequency to running payroll and will of course let you know how it all works.

To set up with a payroll service or independent contractor, some will ask for a fee for every deposit you partake in, while some may offer it for free. You should compare options and choose one that best suits your needs. Ask questions about the different types of direct deposit management offered, fees, taxes and many other services before making a decision.

In order to run payroll, your employees will need a direct deposit from you. This paperwork will vary by employer, however you need to collect this information as soon as possible. Every employee needs to provide the following information (once consented) and with a high degree of precision:

  • Name and address
  • Social security number
  • Bank name, account number, account holder name
  • Routing number

Afterwards, you will need to add each of your employees to the payroll system you have and within more than a week, you will be able to offer direct deposit for their pay checks.

Direct deposit: More savings, more time

A more efficient method of payment is direct deposit, with 83% of employees preferring this form of settlement. Direct deposit, like most online innovations, has a lot to offer and it’s one option for businesses that want savings.

It helps avoid manual check preparation and saves employees the need for addressing their mail or going to the post office. A payroll company can have better control over the payroll process and when a business switches to direct deposit, its employees often find it easier to get their pay-checks, it reduces the likeliness of fraud, and saves you money buying supplies to make checks.

One of the best ways to cut down on prices is by using payroll systems that make payroll run smoothly and keep you from worrying about all the details. For instance, direct deposit saves not just money but time as well. It takes less effort for employees when banks can take care of making deposits without them having to wait in line!

Not only are you saving money, but your employees as well! With your employee's consent and transfer, direct deposit can also be redirected, with a specified percentage, to an employees savings or investment account.

Additionally, their bank may not add on extra fees like they do for checks, since direct deposit is most often a free service. Therefore, your restaurant is promoting healthy spending and saving habits.

Direct deposit: What to watch out for

Some drawbacks of direct deposit can be avoided, however slip ups can cost you. If you are working manually, make sure that you input time in the schedule to analyze and input your staff's completed work hours and that payroll is assessed before your scheduled direct deposit dates. Again, processing employee's banking information is confidential, therefore you need to put in place security measures to protect this information, or you can get into serious complications.

When putting together all your staff's schedules, make sure you correctly input their working hours and overtime, because once you send off your checks, the automatic deposits cannot be taken back immediately. Therefore, you might run the risk of being in debt if your funds are less than what you send out, be weary of extra bank fees if this occurs.

If something as such occurs and you want to change banks, be certain that you will stick with the new bank since changing banks will result in you needing to collect and authorize all of your employees' information again.

Lastly, direct deposit fees may cost you money due to service fees, and they may seem very expensive depending on how many employees you have and which institution you choose to do your direct deposit. Keep in mind that your bank may even ask for fees per transfer!

Ultimately, payroll systems can be a great help to restaurant owners! They do not have to focus on tedious details and get the job done with efficiency. With payroll management software for restaurants, you will save money as well as time. However it is important that if anything goes wrong or your employees are unhappy about certain aspects of this service that you know what to do. In the payroll world, your restaurant is just one of many clients and you need to be certain that payroll services are worth it for both parties!

Specifically, payroll systems can help with paying employees fairly without too much hassle or confusion. The benefits may be more beneficial for some restaurant owners than others, but payroll management software can be a great help in making payroll run smoothly and save you money. To avoid pitfalls of payroll services, make sure your employees are okay with the direct deposit system prior to signing them up!

Effectively managing payroll and taxes is crucial for the longevity of your restaurant. By implementing these strategies, you'll see your ROI improve, indicating a more robust and resilient business.


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