The Ultimate Guide to Restaurant Payroll Bookkeeping

| 3 min read

The Ultimate Guide to Restaurant Payroll Bookkeeping

As a restaurant owner, you probably already know what a time-consuming job figuring out payroll can be. Keeping track of an ever-changing staff makes the task even more daunting. To help make the chore easier and ensure you don't miss something, we put together this guide with a checklist. 


Even in our modern world of technology, paperwork is still needed. This is particularly true in an industry where employees frequently come and go. The first step in payroll is obtaining an EIN or Employer Identification Number. This identifies your restaurant to the IRS and Social Security Administration. Also, register as an employer through your state's labor department so you can pay the appropriate unemployment taxes. When hiring a new employee, make a file with the following information: 

  • W-4 form - Make sure it is filled out completely and signed. This protects you by ensuring you have all the information to report each employee's wages at tax time. As soon as you hire someone, get this done!
  • I-9 form - This is another must-have as it verifies an employee's work eligibility. It is required by the U.S. Citizenship and Immigration Services (USCIS).
  • Banking information - It is important to have this upfront as well. Direct deposit is a safe and automatic way to pay your employees. QuickBooks Online offers a payroll service that performs this operation for you.
  • Relevant pay wage information - The amount per hour agreed upon, required hours, and other pertinent information. 

Other required steps in new hiring are:

  • Report new hires - Every state has a new hire registry, and you are responsible for reporting all employees. This process is used to locate parents who owe child support.
  • Enter the employee and withholding information - To use a payroll system like QuickBooks Online, you must enter new employees, including name, address, social security number, and the withholding amount. 
  • Employee handbook - Creating an employee handbook is an often overlooked essential task. Employees need to know how your business operates, the expectations, the company culture, and the dos and don'ts. Without this in place, you open yourself up to issues later on down the road. Add a payroll section to inform employees about that aspect of your business too.
  • Benefits - If you offer any benefits, ensure all new hires have this information. 

Labor Law Compliance

There are laws that protect employees from poor working conditions and ill-treatment in the workplace. The line-up includes minimum wage requirements, overtime, safety hazards, etc. Knowledge of your state's and nationwide laws is part of owning a business. Stay updated on changes and post required information in the breakroom or office. 

Payroll Taxes

It is essential to calculate payroll taxes correctly, as fees and penalties are steep for miscalculations. Employers are required to pay the following taxes: 

  • Social Security percentage of 6.2% of income on the employee side and matching of the same on the employer side
  • A Medicare percentage of 1.45% for both sides (withheld from employee check and matched by employer) for a total of 2.9%.
  • Federal income tax, according to the W-4 specifications of the employee, must be withheld and paid on time.
  • The Federal Unemployment Tax Annual, or FUTA, is paid based on each employee's first $7,000 of wages. Employers pay a 6.0% tax rate on the amount.
  • Your state may also charge a state unemployment or reemployment tax rate based on employee wages. In some areas, there are also local or county taxes for unemployment. 

What About Tips?

A tipped employee receives $30 or more per month in tips. Restaurants can count tips as part of the required minimum wage, but tips must comprise at least 8% of the receipts for each pay period. There are many rules about this type of wage that change periodically. Employers check the Department of Labor website for current regulations.


Often, an employer will receive a letter ordering garnishment of an employee's wages. This is typically due to a government school loan in arrears or for back child support. The law requires that the money be withheld from the paycheck and sent to the appropriate agency. There are harsh consequences for ignoring a garnishment by the government, so it is vital to get this done. 

What About Using a Payroll Service?

Hiring a payroll service is the best way to ensure that the right taxes are paid and that you stay on top of the many requirements. Some payroll services offer different levels of assistance, so look closely at what you need before deciding. If you use QuickBooks Online for everyday bookkeeping, opting for the payroll service ties your bookkeeping together.  


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Working with a remote bookkeeping service will still provide you with all the value you could get from an in-office bookkeeper but at a fraction of the cost.

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