There are many issues to consider when planning your restaurant's payroll. First, you must determine how often you'll make payroll. Most restaurants pay every two weeks, but some restaurateurs pay weekly because their employees live paycheck-to-paycheck. Paying weekly can reduce employee requests for advances and loans, but some workers benefit from biweekly paychecks because they can accumulate more money to pay large bills like rent.
Some payroll services offer discounts for a monthly payroll, but it's hard for minimum-wage earners to wait a month for their pay. Monthly payroll saves money, but that works best for fine dining restaurants where the chefs earn high salaries and the servers take home big tips daily.
The second most important consideration is whether you want to handle payroll in-house or outsource the work to a payroll service.
Options for Handling Payroll In-House
You can easily learn how to process payroll in-house using payroll software or simple spreadsheets that you design in Excel. It’s just a matter of copying and pasting the right formulas to make the necessary calculations. You can enter information once, and carry the information to other spreadsheets for monthly, quarterly and yearly reports, other accounting systems and government-mandated reports. If you’re not computer-savvy, it’s easy to hire a manager who can learn to process payroll. Feeding the right information to a service for a few months will enable your payroll manager to learn the process well enough to handle matters in-house.Important Tip: When writing formulas, it’s important to use the round() function for all your totals. Otherwise, the computer will retain exact percentages to make calculations, which could throw off your grand totals by small amounts.
Regardless of whether you develop your own spreadsheets, use payroll software or outsource your payroll, you’ll still need someone in-house to keep up with onboarding, identity verification, updated payroll details, current rate of pay, overtime, if applicable, and tracking the number of hours worked throughout the given pay period for each employee. Your payroll person will have to forward all relevant information to any service such as changes to withholding, new-hire information, court-ordered judgments and changes to benefits.
Given that accurate information depends on in-house intelligence, it’s relatively simple to make the actual calculations with software or spreadsheets. You can print payroll checks automatically with hardly any extra effort. The benefits of processing your payroll in-house include:
Processing payroll with software is far less expensive than hiring a payroll service, and creating your own spreadsheets is even simpler.
You control your information and processes and can customize your payroll without exposing sensitive information to third parties.
Integrating with Other Systems
Filing payroll reports for disability insurance and unemployment taxes is a major concern for restaurant owners. In-house payroll systems can integrate with other software applications and simplify preparing reports.
Easier Employee Access
Many payroll services allow employees to check their records and update personal information, but most employees would prefer to provide the information to someone at the restaurant. This person needs to forward the information, and it’s just simpler to handle matters like these in-house.
Keeping Up with Regulations
It’s possible that a service won’t keep fully abreast of all the applicable changes in local, provincial and national laws. Restaurants are big targets of regulatory reforms, and the place most likely to receive important updates is the local restaurant.
Possibility of Fraud
Some services have been known to embezzle funds that were supposed to be deposited with tax agencies according to one article that still recommends outsourcing. Obviously, it’s important to research services to find one that’s reliable and professional with a strong track record.
It might be impossible to get records from a service quickly enough to file critical last minute reports or correct inaccuracies whether generated by the data you provided or a mistake made by the service.
Having an in-house payroll person offers critical advantages because your employees always have someone available to make changes, provide records and fill out confidential reports when they apply for government benefit programs such as food, rent and utility assistance.
Using a Payroll Service
Using a payroll service delivers some distinct advantages, but you'll have to pay a premium. Although flat-rate fees are available for as little as $25 USD per payroll period, these fees can top $200 or more depending on the number of employees and services. Standard services include processing the payroll information that you provide, printing checks, handling direct deposits, filing taxes and sending end-of-year statements for employees to use when filing income taxes.
The costs also depend on payroll frequency, the number of employees, country, state or province, city and the complexity of calculations. Small restaurants with 10 or fewer employees generally pay more per person than larger establishments. Some services assess a surcharge for each employee in each pay period that runs from $1.50 to $5 USD. Some payroll services that can generate extra charges include:
- Handling multiple deductions for benefits such as health insurance, retirement savings and employee meals
- Delivery charges for sending checks in an expedited way such as next-day delivery
- Adding employees to the payroll, which might incur extra charges
- Withholding fees and transmitting funds for court-ordered restitution, alimony and child support
- Dealing with complicated payroll situation in restaurants that might include tipped employees, hourly workers and salaried chefs and managers
- Keeping track of how tips affect minimum wages because some regions require full minimum wage plus tips while others allow restaurants to deduct tips from what they pay tipped employees
- Verifying a new employee's right to work
- Filing reports with various government agencies
- Frequent onboarding and offboarding of employees
- Managing automatic check signatures
- Filing reports with multiple tax agencies
- Integrating independent contractor payments and issuing the appropriate forms such as U.S. IRS 1099s
Despite the costs, most restaurateurs are more confident choosing a service because experts in restaurant payroll understand the law, guarantee that employees are paid on time and ensure that calculations are error-free based on the information that they receive.
Choosing a Payroll Service
If you're not familiar or comfortable with handling payroll in-house, it's a good idea to start out with a payroll service. As you learn the details, you'll soon find that you or your staff are supplying all the critical information and reviewing and signing the checks. It's relatively simple to automate calculations with software or spreadsheets once you get a firm grasp on what's needed. One business article recommends the following method to choose a payroll service.
- Ask friends, business associates and other restaurants for recommendations.
- Research any promising payroll services online to avoid questionable companies that have had many complaints filed against them.
- Ask about costs and hidden fees.
- Find out if direct deposit costs more.
- Determine the costs for weekly, biweekly and monthly payroll.
- Request a copy of a typical bill to see the real-world breakdown of costs.
Above all, it's also important to have an accurate and reliable expense management and accounting system.
Making the Right Choice for Your Business
It’s your business, and the ultimate responsibility stops at your desk. Some restaurateurs and bar owners prefer to rely on themselves or trusted employees while others prefer hiring a professional service. However, Dealing with employee requests for payroll information can be burdensome and time-consuming. In an ideal situation, outsourcing can free time to focus on core business activities and provide the right expertise to ensure professional efficiency. However, you can do payroll yourself to save money, generate greater access to payroll details and integrate your payroll with other software and applications. Along with choosing an inexpensive POS system, handling your own payroll can generate many benefits and cost savings.