When it comes to recruitment and employee retention, compensation reigns supreme.
In a December 2016 poll by 60 Minutes and Vanity Fair, 35% of respondents identified money as their top priority when choosing a job. Sure, flashy work perks and incentive programs can boost employee morale and motivation, but nothing is as effective at recruiting and retaining employees than a healthy paycheck.
So, how do you keep your staff around (and happy to be there)? Pay them well, and pay them correctly.
Easier said than done, of course. But this does not excuse a restaurant’s obligation to pay employees — salaried and hourly — according to state and federal employment regulations.
To help managers ensure they manage payroll effectively, and help employees secure appropriate compensation, today we’re tackling a key cash consideration: time and a half payments.
What is Restaurant Time and a Half?
We all know the service industry does not conform to a “9-to-5” business model.
Busy days, late nights, and around-the-clock scheduling operations mean it’s both common and easy for employees’ hours to stretch beyond a traditional 40-hour week.
According to the Fair Labor Standards Act (FLSA), restaurants must pay hourly and nonexempt salary staff designated overtime premiums when they work more than 40 hours in a workweek (typically defined as seven consecutive 24-hour periods).
The minimum requirement is 1.5 times an employee’s regular pay rate — hence “time and a half.”
In other words, a time-and-a-half payment means employees are compensated for one hour of work as though they worked for an hour and a half.
This term is often used interchangeably with overtime, but it’s worth pointing out overtime policies can and do vary between employers.
There are a number of situations when a restaurant manager might consider paying or be mandated to pay staff at time and a half:
- As compensation for overtime hours
- As incentive to come in to work on certain days of the week (Sunday is a primary candidate for time-and-a-half)
- To comply with government mandates for things like holidays
In the United States, provisions surrounding time-and-a-half are issued by the Fair Labor Standards Act (FLSA). There, you’ll also find must-have information about federal minimum wage, record keeping, and other labor standards.
Why Does Time and a Half Matter to Restaurants?
The restaurant industry is known for having some of the slimmest profit margins around. An average profit margin for a restaurant depends on the type of operation, but typically falls somewhere in the realm of between 3 to 5% range.
To keep a restaurant running smoothly and profitably, managers must watch their margins like hawks, keeping an eye out for opportunities to either reduce costs or improve returns. Both are proven ways to give your profit margin a nice little boost.
Labor costs (salaries and wages) account for upwards of one-third of a restaurant’s operational costs. If managers aren’t keeping up-to-date with the hours their staff are working, they might land themselves in a sticky — and expensive — overtime situation.
Further, if hours aren’t paid out at the appropriate rate, your restaurant could be dinged for non-compliance with state and/or federal requirements.
As you can imagine, neither situation is great for a restaurant’s reputation or bottom line.
Time and a half has become an increasingly hot topic given the controversial new overtime rules proposed for the United States.
These federal regulations (currently on hold pending legal review) have the potential to place additional financial burden on restaurateurs, as the salary threshold for overtime eligibility would more than double if approved.
How to Manage Restaurant Time and a Half
To manage and— where possible— minimize time and a half payments, consider a top-to-bottom audit of your workforce. Now, you can determine the cost of your current scheduling practices. Ask yourself:
- Do you have enough staff to meet operational needs?
- Are work hours distributed evenly?
- Might overtime spikes be linked to issues related to workplace culture (low employee morale, inadequate training, etc.)?
- Are you clearly communicating company policies regarding overtime?
- Are certain employees chomping at the bit for extra shifts?
- If yes, are those extra shifts tipping them over the 40-hour mark?
Many of these answers are available through back-end analytics from integrated labor tools. For example a restaurant employee scheduling software like 7shifts will give you your restaurant’s labor percentage so you know how best to schedule your team. Features like OT alerts will notify you when an employee is approaching time-and-a-half eligibility, helping management stay on top of who is working when (and at what cost).
Another way to manage time-and-a-half payments is to invest in restaurant technologies and software, like online ordering and smart restaurant POS systems. These investments will free up staff time, allowing them to power through orders and tasks with greater efficiency. Always choose software with sophisticated back-end analytics, as these that will help you make better business decisions.
Why Does Time and a Half Matter to Restaurant Employees?
This is especially relevant for wage workers, since your time quite literally translates to money.
Familiarizing yourself with your rights and entitlements is an essential practice to protect yourself from exploitative errors and honest mistakes. Some restaurants will cover compensation as part of their employee onboarding process. If not, take time to click through local and federal employment regulations, or chat to your management team to ensure you have the information you need to get the pay you’re owed.
How to Calculate and Track Time and a Half
Before you can calculate your time and a half pay, you must first identify your regular rate of pay.
For salaried employees below the eligibility limit, you’ll calculate your regular rate by dividing your earnings for any given workweek by the total number of hours which time and a half pay will apply.
Wage employees will find their standard hourly pay rate on their pay stub. If, for example, you earn an hourly rate of $10 per hour, your time-and-a-half rate — applicable to anything over 40 hours — would jump to $15.
That’s it, that’s all! We hope this overview of time-and-a-half payments makes dollars and sense — pun intended.