Restaurant Payroll - Presentation Deck

One Size Doesn’t Fit All: Restaurants Need a Payroll Expert

©2015 Heartland Payment Systems

The Penalties on Restaurants are Severe

§  There are nearly 75,000 pages in the IRS tax code and approximately 4,000 annual changes to federal, state and local tax codes

§  40-45 percent of all small business—and restaurants— will incur a tax penalty this year


Restaurants Face Special Payroll Challenges

§  Tipped Employees

§  Direct Tips vs. Indirect Tips

§  Cash Tips vs. Credit Tips

§  Under-Reporting of Tips

§  Shortfall Management

§  Minimum Wage

§  Year-End Tip Allocations

§  FICA Tip Credit Opportunity


10 Critical Restaurant Payroll Issues

Tax Compliance

Expertise

Time Constraints

HR Compliance

Employee Satisfaction

Tipped Employees

Adherence to Minimum Wage Requirements

Shortfall Management

Tip Allocations

FICA Tip Credit

1 2 3 4 5

6 7 8 9 10


Payroll Challenge #1—Tax Compliance

§  One out of every three employers pays a payroll-related tax penalty each year. Those companies, on average, had six penalties during the year

§  Companies that process in-house are three times more likely to receive a penalty notice than those that outsource 1


Payroll Challenge #2—Expertise

§  In-house payroll administrators rarely monitor tax code changes, legislative rulings and other impacting items

§  When administrators leave the organization, so does their knowledge 2


Payroll Challenge #3—Time Constraints

§  Payroll is a high priority,

consuming 80-120 hours each year

§  Restaurants with 50+ employees are triple that amount

3


Payroll Challenge #4—HR Compliance

§  Staying on top of labor laws and managing compliance is challenging

§  The Affordable Care Act, changes to minimum wage, updates to federal forms, required postings, OSHA regulations, etc. are constantly evolving

§  Filing new-hire information and handling garnishments must be routinely administered

§  Maintenance of job descriptions and company handbooks are vital for protection against lawsuits

4


Payroll Challenge #5—Employee Satisfaction

§  Payroll accuracy

§  Availability of direct deposit and/or payroll debit card

§  Online access to retrieve pay statements, W-2s, etc. 5


Payroll Challenge #6—Tipped Employees

§  Must maintain a record of tip declarations for all tipped employees

§  Tip declarations must be collected at least monthly—typically on a per payroll basis

§  Paid and unpaid tips should be recorded as separate earning types in the payroll system. Unpaid tips must be paid out as part of payroll process

§  Separating cash tips vs. credit tips, and direct tips vs. indirect tips, may be important based on the policies of the restaurant

6


Payroll Challenge #7—Adherence to Minimum Wage

§  Tipped employees can be paid an hourly rate below minimum wage

§  Minimum hourly rates do exist for tipped employees as well

§  Most states require that a tipped employee’s total earnings (hourly rate + tipped income) meet or exceed minimum wage

§  Minimum wage requirements should be routinely measured each pay period

7


Payroll Challenge #8—Shortfall Management

§  Tipped employees who receive substantial tips paid out at the end of a shift can often end up with a “net zero” check

§  These “net zero” checks often result in employees not having enough earnings to offset all taxes and/or deductions

§  These shortfalls must be tracked and managed to avoid issues of noncompliance

§  Tax shortfalls, particularly with FICA taxes, must be tracked and repaid on a future check if possible. If not, FICA shortages must be reported on a W-2

§  Employers must also account for voluntary deductions

8


Payroll Challenge #9—Tip Allocations

§  The IRS requires most restaurants to report tipped income of at least eight percent of gross receipts

§  Restaurants must measure this to ensure compliance. If reported tipped income falls below eight percent of gross receipts at the end of the year, tip allocations should be provided to tipped employees

§  Tip allocation determinations should be completed using accepted accounting standards using hours worked or gross receipts methodology

§  Allocated tips are simply added to earning for purposes of W-2 reporting

9


Payroll Challenge #10—FICA Tip Credit

§  The IRS allows for restaurants to take a business tax credit base on the FICA taxes paid on tipped income

§  Restaurants can see hundreds or even thousands of dollars in tax credits per tipped employee per year

§  A restaurant with 10 tipped employees, who work 40 hours per week, make $3 per hour, and $400 per week in tips would have a FICA Tip Credit for the year of approximately $12,000

§  It is estimated 70-75 percent of restaurants to not take advantage of the FICA Tip Credit program

§  FICA Tip Credits would far exceed payroll service fees on an annual basis

10


Selecting a Restaurant Payroll Expert

§  Expertise—Are they experts in restaurant payrolls?

§  Service—Does their service model fit your service needs?

§  Price—Do they offer value and is there integrity in their pricing model?

§  Technology—Can they interface with your POS and accounting software?

§  Reputation—Do they deliver in areas of accuracy, timeliness and support?

§  Fit—Do they offer everything you need? Are they too big to deliver personal service? Can their service grow with your company?


The Heartland Restaurant Payroll Benchmark

Recommended

by the NRA and 45 state associations

One-to-One

service model

Three-year locked-in,

all inclusive, transparent

pricing

Online services with integration capabilities with

leading restaurant POS systems

and accounting software

Highest rated

level of customer satisfaction out

of all Payroll providers*

* Net Promoter Scores 2013, 2014, 2015

Thank You

Restaurant Payroll - Presentation Deck

Recruiting & HR

Transcript of Restaurant Payroll - Presentation Deck