5 Things You Need to Know About New Employees and QSR Payroll

According to the Center for American Progress, the cost of finding, hiring, and training an employee earning under $30,000 a year is 16 percent of that person’s annual salary. The cost for employees earning between $30,000 and $50,000 a year is equal to 20 percent of a year’s wages. Coupled with the fact that the hospitality industry has had a turnover rate that topped 70 percent for the past two years – a rate that is still climbing – these costs can add up fast.

Hiring carefully, treating employees well, and paying them fairly are all things you can do to try to stop this revolving-door syndrome. But have you ever thought about how payroll factors into employee retention? By managing payroll well, employees get paid correctly and on time, which keeps them engaged and happy (and less likely to leave). Good payroll practices also help you avoid legal problems. 

Here are five tips to keep employees informed (and happy) and your payroll in good shape.  

Start with the right employment records. You are required to confirm whether employees are eligible to work in the U.S. by having them complete an I-9. This probably isn’t news to you. But you can also use the U.S. Citizenship and Immigration Services’ free E-Verify website to confirm that the information you got matches what the government has. Applications like Hireology can also help manage these efforts.

You also need to have new employees fill out a W-4 form so you know how much to withhold in federal taxes. And don’t forget to report your new hire to the state. It’s a lot of paperwork, but it can save you from a lot of headache down the road.

Understand what you need to withhold, and tell your employees. That first paycheck can be a shock to a new employee. He or she may not realize exactly how much gets withheld and for what. Do them a favor and prepare them ahead of time. Let employees know about common paycheck deductions such as Medicare and Social Security taxes (and that you pay half), federal and state income taxes, health and retirement benefits, any other voluntary withholding, and court-ordered garnishments.

Know what to say about the taxation of tips. Restaurant employees typically rely on tips for a majority of their income. Make sure your employees know that tips are considered taxable income. If an employee makes more than $30 in tips per month, he or she has to report it. Beyond that, there are many rules that both you and your employee need to know:

•The IRS defines tips as cash, payments via credit cards and electronic means, noncash tips (like tickets), and anything received through a tip-sharing arrangement.

•Both tipped and hourly employees are non-exempt, so they’re subject to the rules that govern minimum wage and overtime (over 40 hours/week). Make sure you calculate overtime properly, and tell employees how it’s done. Use the full minimum wage amount to calculate overtime on tipped staff.

•Employees must report their tips to you by the 10th of the month following the month when they were received using this IRS form or an alternative method.

• You have to file the Form 941 (IRS payroll form) every quarter to report tip income, which must be equal to 8 percent of that period’s receipts.

•You are responsible for withholding taxes on tips. If an employee’s regular wages are not enough, be sure to withhold taxes in the correct order.

Stay away from paper as much as possible to keep your books squeaky clean. Paper gets lost or thrown away easily. And, manual processes leave room for human error and take time that you are already short on. A digital process can help minimize payroll mistakes and ensure nothing gets missed. If you do decide to use paper checks for your employees, be sure to record them. Forgetting can cause major problems.

Use an online payroll system. With more time on your hands, you are free to focus on other restaurant issues. Online services like Gusto also keep up with government regulations so you don’t have to. It’s the key to making things run efficiently.

Looking for someone to take the complication and stress of payroll and bookkeeping off your hands? BKE can make sure your payroll software is set up correctly, or just handle it all for you. Get in touch.