As a small business owner, you may find that the nuances of processing a restaurant payroll are a bit complicated.

However, it gets easier as you become more familiar with the wage and reporting requirements that you must follow when paying tipped employees.

As an employer of restaurant personnel, you have an opportunity to lower your labor cost by applying a tip credit toward the minimum wage of employees who receive $30 or more per month in tip income.

Tip Credit

The Fair Labor Standards Act allows you to apply a credit of up to $5.12 per hour toward the wages of your tipped employees.

You will pay the difference as a cash wage of no less than $2.13 per hour. The expectation is that the employee’s tip income will meet or exceed the tip credit amount.

At the end of each seven-day work period, you must confirm that the employee has received at least $5.12 per hour in tips from your customers or from your other employees.

If an employee’s combination of cash wages and tip income does not meet or exceed the minimum wage, you must make up the difference. As of July 24, 2009, the minimum restaurant payroll was $7.25 per hour.

Restaurateur News - Restaurant Payroll overtimes
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Calculating Restaurant Payroll Overtimes

Tipped employees are entitled to receive an overtime premium for all hours in excess of 40 hours in a workweek. When calculating overtime for a tipped employee who works 45 hours in the workweek, you must pay the overtime premium for five hours. 

You may apply the tip credit for all hours worked.

Then, you must use the full minimum wage rate to calculate the overtime premium amount.

To calculate the earnings for a tipped employee with 45 hours for the workweek, you multiply the 45 working yours by the cash wage rate of $2.13 per hour. Use 50 percent of the minimum wage rate of $7.25 per hour — $3.63 — to calculate the overtime premium.

The results are $95.85 for the actual hours worked and $18.15 for the overtime premium.

That’s how you calculate restaurant payroll overtimes and you can also do those calculations with any restaurant payroll software…

Deductions from Pay

The FLSA provisions forbid an employer to deduct from an employee’s wages to cover uniform costs.

For example, the acts of negligence deduction could reduce the employee’s pay to less than the minimum wage – and that’s not allowed.

If you pay your dishwasher at the minimum wage rate, and he breaks at least 30 percent of your glassware every night, you cannot recover your losses from his pay.

Such deductions would place him below the minimum wage rate, and this is an FLSA violation.

Restaurateur News - Restaurant Payroll deductions
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If you are occurring paying credit card tips through payroll, you must be careful in deducting the credit card fees.

While deducting the fee is allowable, doing so may also place the employee below the minimum wage amount.

Tip Reporting

If an employee receives more than $20 a month in tips from your customers or from your other employees, he must give this information to you in writing.

But be careful, there are many types of employees

You are to use this information to collect and remit the employee’s income tax, social security, and Medicare withholdings.

If the cash wage amount that you are paying to your tipped staff does not cover the tax amounts, you have until the end of the year to collect the deficit amount from the employee.

If you are not able to collect the deficit, you can show the uncollected amounts on the employee’s W-2.

These are the most important restaurant payroll guidelines that you need to keep an eye on.

There is also a payment schedule you need to decide. Weekly or Bi-weekly?

It’s up to you…


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