By Dan Jacobs

Payroll can be a struggle for all business owners, but for restaurants, it can be a really complex endeavour, involving much more than just figuring out wages and tips. With today’s labour shortages, getting your payroll on track may mean greater employee satisfaction and increased retention. Simplifying your payroll also means more time for you to focus on running your restaurant, so get set up with the tools you need to master your restaurant’s payroll.

Getting set up

The restaurant industry has some specific conditions that should guide your payroll setup: there are typically a high number of hourly employees, tips received by these employees, and labour laws governing overtime work. Together, these factors mean that your payroll process must accommodate the correct calculation of wages for hourly workers’ regular pay, overtime, non-cash tips, taxes, and benefits. While these calculations can be done by hand, payroll software is highly recommended for its superior accuracy and efficiency. It’s best to follow a checklist for running payroll to make your process consistent and repeatable.

Is there an optimum schedule for payroll? While many businesses default to a biweekly payroll schedule, all restaurants don’t need to follow the herd. The best payroll cadence is weekly, offering several advantages for your business. First, it simplifies budgeting for both employees and the employer. The employer has a more accurate picture of the cash liabilities the business carries, and the employee can count on receiving roughly the same amount each week. Next, because employees can show extremely steady earnings, they can more easily qualify for loans on homes and cars. Finally, more frequent paychecks increase employee job satisfaction, leading to reduced turnover and a loyal workforce.

Your bank account

It’s best to create a dedicated payroll bank account to hold funds for disbursement to employees. That way, there’s never any question in your mind if you have the cash on hand to meet payroll, once all your liabilities are accounted for. Having a single payroll account also means that come tax time, your calculations are simplified, as there’s just one place to look for a record of payroll transactions.

Proper paperwork

One key to a smooth payroll process is having complete paperwork. Each employee should have filled out a Form TD1 for tax withholding, providing their full legal name, address, date of birth, and social insurance number. Lastly, the employee should furnish bank account information to set up direct deposit to their chequing account.

The employer also has paperwork to fill out. There are some valuable online resources for you to determine exactly what forms your business needs to submit to the government for you to be compliant as an employer.

Follow labour laws

The employer must deduct the correct amount from employee paychecks in accordance with the Canada Revenue Agency (CRA). They offer a calculator to help you get set up and figure out what is required for your area and for your business, making it simple for you to get the math and the process right.

Depending on your location, the laws may vary regarding factors like the amount of hours that constitute a full-time job, pay requirements for overtime, mandatory break times, and maximum hours of continuous operation. It may also be worth your while to consult with a local attorney to ensure you’re in compliance with relevant laws in your area.

How tips figure into payroll

Many customers these days pay and tip with credit or debit cards. In a modern point of sale system (POS) non-cash tips accrue on a daily basis and can either be paid out at the end of the shift, or weekly (if you’ve adopted weekly payroll). Cash tips are always distributed daily. It’s important to remind your employees that cash and non-cash tips both count towards their taxable income and need to be reported to the CRA come tax time.

Always meet payroll

There are times in the restaurant business when money gets tight. During such times, it’s natural to look at your liabilities and see what payments can be delayed. Don’t make the mistake of thinking payroll is a deferrable expense. If you want to retain your workforce, it’s vital that you always make the payroll on time and in full. There’s no quicker way to lose valuable employees than making them unsure about when and whether they’ll get paid.

Modern payroll software can get you organized, precisely calculating amounts owed to employees based on POS data showing when employees were working, and completing the disbursement through direct deposit or pay cards. When software replaces manual procedures and spreadsheets, you save management time, reduce human error, and gain a documented, repeatable process. There’s really no reason to be running payroll by hand in 2023.

Dan Jacobs, RASI Chief Operating Officer- A tenured expert in the restaurant industry building long-standing relationships with numerous QSR/TSR, single, and multi-unit operations for 20+ years in various leadership roles.