When you’re running a full-service restaurant, you can’t afford a lot of mistakes. And as you’ve probably found out, restaurant payroll can be complicated. From wages and tip calculations to shortfalls and deciphering your FICA tip credit, there's a lot to remember—and a lot that can go wrong.
Someone on your staff is probably handling your payroll, or even better, managing a payroll service. Hopefully, your payroll service is handling the calculations and payroll tax payments for your restaurant, reducing administration time and saving the business from potentially costly mistakes. In the best of worlds, you are using an online payroll service. After all, payroll mistakes could cost your restaurant a lot down the road, including the trust—and the morale—of your employees. Continuing errors could potentially result in penalties, not to mention the departure of reliable, talented staff. In fact, IRS data indicates employers paid a whopping $4.5 billion in payroll tax penalties last year alone. And of course you understand the politics on Main Street. If word got out about these problems, your restaurant’s reputation would surely be at stake.
You can’t afford these mistakes. If your restaurant is still running payroll manually, you’re taking on a lot of risk.
Here are the top five restaurant payroll blunders:
1) Initial Payroll Foundation Errors
Your initial setup—the foundation of your payroll—is very important. Unfortunately, it is where many errors start, and then snowball into large and costly mistakes. If you didn't register your restaurant, set up federal, state, and local tax withholdings, or classify full and part-time employees correctly, you are starting with a shaky payroll foundation.
In order to file the proper amount of taxes, you'll need to understand how much to withhold from employees for federal and state income taxes, Social Security and Medicare taxes, and other applicable state and local payroll taxes. Plus, you need to understand how much your restaurant, as the employer, will pay in taxes.
2) Late or Incorrect Deposits
There are many rules about how often and which method you use to deposit, depending on your business' tax liabilities. Once you've taken tax funds from employees and contributed tax funds from the restaurant, you need to know when and how those funds should be deposited. Are you required to deposit monthly? What forms should you use? Do you have the option to deposit funds electronically?
3) Neglecting to Record Paper Checks
Working in the restaurant industry is hard, and it can be stressful and exhausting. Unfortunately, this leaves a lot of room for human error. If you've been able to master the necessary payroll tax rules, you need to be sure you don't skip some of the less complicated steps of running a payroll. We've seen that in many instances when the person running the restaurant payroll is pressed for time, they make the mistake of giving an employee a manual check—bonuses and payday advances are common examples—but forget to record that check in the payroll processing system. This simple error will leave your books off balance and your tax deposits in disarray.
4) Failure to Update State Unemployment Insurance (SUI) Rate
Most states update their SUI rate at the beginning of the year. If you forget to add the new rate to your payroll system, your filings will be incorrect. You could incur a fine from the State Unemployment Insurance agency.
5) Running Inaccurate and Inconsistent Payroll
If your payroll clerk isn’t a stickler for details and doesn’t check their calculations, they could end up overpaying—or underpaying—an employee. Even worse is if your payroll clerk forgets to run payroll altogether. Forgetting to process payroll leads to unhappy employees. It takes time to rebuild lost trust and morale.
You can save time and money and get peace of mind with easy reporting when you use an online payroll service. Online payroll services assist small business owners in keeping up with ever-changing regulations. You’ll have time to focus more energy on your patrons and growing those receipts!
The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.