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How to Streamline Human Resources and Payroll in the Restaurant Industry

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Successful restaurant owners and operators don’t just provide great food. For food service and hospitality in particular, an essential part of the guest experience is the interaction with employees.

The people piece of the puzzle can be challenging for restaurants. Because of the complicated nature of human resources (HR) and the sprawling regulations surrounding payroll, HR and payroll can be a recurring headache for restaurant owners and operators.

Finding the correct approach to your payroll and HR requires expertise and knowledge of a complex labor landscape. Unfortunately, even small mistakes in payroll and HR can be costly for business owners. Learning the basics of restaurant HR and payroll can help you prepare a plan that works for your business.

Human resources and payroll overview

The restaurant industry has some unique characteristics that make payroll and HR especially difficult, such as a high turnover rate, ever-shifting scheduling, and varying wage and tip income regulations. In addition, in the age of social media, your labor practices and HR policies are under closer scrutiny than ever by both your employees and the public. There are some general areas to focus on when starting to audit your human resources information systems (HRIS) and payroll systems.

Tailor your hiring and recruiting practices

The restaurant industry is known for a high turnover rate, and constantly replacing employees can add up to a large cost for your business. The first step in reducing high turnover is to examine your hiring and recruiting practices.

How are you communicating with your potential new hires? Do they understand the expectations for the role? Are you qualifying candidates with prescreening interviewees and interview templates?

There are many moving parts to hiring and recruiting. Depending on the structure of your restaurant, your HR department may not be physically located at the restaurant, adding another layer of coordination.

An HR software solution can help you ensure all parties are on the same page by tracking applicants throughout the recruiting and onboarding process. You can also rely on time-saving tools, such as multiple-site job postings and automatic alerts.

Design an employee onboarding process

One key to keeping employees is to create an efficient and thorough onboarding process. The faster your new hires are up to speed, the faster they can be engaged in your business and supporting your team. Cultivating a library of tools for your new hires, such as company handbooks, checklists, and training manuals, can help you start off on the right foot.

Because new employees come with lots of required paperwork, an HR solution can also help you onboard new employees faster. Electronic onboarding, as opposed to paper forms, can not only take the stress off your HR team, but it can also make it easier for your new hire. With online forms like W-4, I-9, and E-Verify integrated with your restaurant accounting software, your onboarding process can be more efficient and less prone to errors.

Create a safe and respectful workplace

Your employees rely on you to provide a safe working environment. As such, your restaurant business must have an HR plan in place to proactively address any harassment complaints. Teaching your policies, training your managers, and educating your employees about your code of conduct can help you respond quickly and transparently to any complaints that arise.

Know your payroll and benefit requirements

Restaurant payroll is particularly challenging because hospitality employees may receive different kinds of compensation. The Fair Labor Standards Act (FLSA) is national legislation that regulates wages and hours worked for employees. On top of federal legislation, many states and localities have their own labor regulations. As an employer, you are required to keep track of compliance and meet all obligations, otherwise you can be liable for back wages, additional taxes, and penalties.

Here are some specific areas of payroll that you should be paying close attention to:


Wage and Hour Laws

While the federal minimum wage has stayed the same for almost the past decade, many states and municipalities have passed higher minimum wage rates. Your locality, state, and federal payroll regulations may all have differing requirements. Laws can vary about tip income, minimum wage, multi-pay rates, overtime, multi-rate overtime, and multi-location rules.

For multi-location or multi-state companies, running payroll and documenting compliance can be especially difficult. Since payroll processing can draw from multiple systems, such as point of sale (POS), accounting, and scheduling, integrations between all of your restaurant management systems are key to meeting your reporting challenges.

Ideally, your payroll and HR software integrates with your restaurant management systems to automate this complex process, even if you have locations in multiple states and localities.

Payroll Best Practices

When it comes to labor, as an employer, not only are you required to comply with payroll regulations, but you must also document your compliance. You must track everything from overtime hours to shift changes and time off, to avoid costly noncompliance mistakes.

To correctly run payroll, accurate record keeping is a must. Today, there are restaurant payroll & HR software solutions to help with record keeping and compliance obligations. A restaurant-specific system with built-in integrations can help you track the data specifically required for restaurants, such as tip income reports.

Navigating Payroll Taxes

All employers are responsible for withholding employee income taxes and the employee share of social security and Medicare taxes, reporting this information to the IRS. However, calculating payroll taxes for an hourly back-of-house worker differs from tipped employees. Restaurant owners are also obligated to ensure tipped employees report all tip income, keeping the records and filing reports needed for appropriate tax withholding.

With the varying wage earners in a restaurant, restaurant payroll taxes can quickly get complicated. Integrated payroll, POS, and scheduling systems allow for streamlined restaurant reporting software capabilities and can help you meet your payroll tax reporting obligations.

Understanding Workers’ Compensation

Federal and state governments have Workers’ Compensation programs that provide compensation to employees injured on the job. State laws can vary, so it’s necessary to stay up to date so you are not found in violation of any rules.

There are many potential safety issues in restaurants, from kitchen injuries to sanitation problems. Because legal fees, penalties, and payouts can be quite steep, it pays for your HR department to be proactively prepared for possible workers’ compensation issues.

Meeting Affordable Care Act (ACA) Requirements

Under the ACA, employers are required to offer full-time employees compliant health coverage and also file information about this offer to the IRS. Reporting is required for employers with 50 or more full-time employees and self-insured employers of any size. ACA defines full-time employees as those who worked an average of 30 hours or more per week for more than 120 days a year.

This complex reporting requires a robust data-tracking system to keep up with shifting restaurant schedules. Many restaurants store data from HR, payroll, time and attendance, leaves of absence, and health benefits in separate systems. All of this data must be extracted, aggregated, and consolidated to accurately report to the IRS. A payroll and HR system that’s integrated with POS, scheduling, and your benefits administration tool can help you accurately extract and aggregate data for IRS reporting.

Filings and Paperwork

Payroll and HR compliance comes with lots of different paperwork to file and regulations to follow. Here are some of the most common forms and requirements:

1.  Labor Law Posters

The US Department of Labor (DOL) requires that some notices of labor rights be posted in the employee workplace. Check the DOL workplace posters page to understand which posters you are required to display at your business.

2.  8027 Tip Reports

If your restaurant employs more than 10 tipped employees, you are required by the IRS to use Form 8027 to report tip income. In addition, as an employer you can use this form to determine allocated tips for tipped employees. Your restaurant payroll software will automatically  track this information for easy IRS reporting.

3.  OSHA Logs

The Occupational Safety and Health Administration (OSHA) law requires employers with more than 10 employees to keep an annual log of reportable work-related injuries and illnesses, called the OSHA 300 log. These reports include details about the incident, the employee, and any missed work. Some HRIS allow for this data to be tracked in the solution for easy reporting.

4.  ServSafe Certifications

ServSafe is a safety training course specifically designed for the food industry, accredited by the American National Standards Institute (ANSI). Some municipalities or restaurants require this certification for their management or employee-level positions, because it verifies basic food safety knowledge.

5.  Bartender Licensing

Some localities may require a bartending license or certificate to serve alcoholic beverages, although this requirement varies by state or municipality. This bartending licensure generally requires taking a licensing program that is approved by a regulatory board.


Restaurant HR and payroll can be complex, but with an understanding of the basic concepts, you are better equipped to meet any new challenges. Once you are able to set up thorough, functioning payroll and HR systems, you can spend more time focusing on what you need to: running your business. If you’d like to know more about solving the challenges of restaurant payroll, download the free guide, Ultimate Guide to Payroll for Restaurant Operators.

Restaurant365 incorporates Payroll + HR software, scheduling software, accounting software, restaurant inventory management software, and restaurant operations software into an all-in-one, cloud-based platform that’s fully integrated with your Point-of-Sale system, as well as to your food and beverage vendors, and bank.