This guide about managing restaurant staff will teach you – restaurant owners, operators, and managers – all about finding, hiring, training, onboarding, and retaining the team of your dreams.
The following steps outline the restaurant staffing process from beginning to end.
Restaurant employee referral programs are a highly effective recruiting strategy. For one thing, they can save your restaurant money on recruiting costs by helping you find the right employees faster. In fact, new hires sourced through referral programs produce 25% more profit for their companies than new hires sourced through other means. Your employees will also be happier when they’re working with people they want to work with and know are a good culture fit.
Many restaurants offer employees a bonus for a referral which is a great way to inspire your team to share high-quality candidates. When it comes to rewarding bonuses, cash is king, but don’t be afraid to get creative. If you’re in need of ideas, think about your staff and what sorts of rewards would truly motivate them. Here are a few ideas to get your wheels turning:
A weekend off
Extra vacation days
Free meals — who doesn’t love free food?
Shift preferences for a week or a month
The latest technology — think iPads, GoPros, or a smartwatch
Tickets to a big sporting event, concert, comedy show, or the movies
A free three-course meal for them and a friend
You don’t have to offer your referral program to only employees, either. Tell your loyal customers, and they’ll broadcast it to their networks. Announce it on your personal social media channels. You’ll be amazed at the reach your employee referral program will get.
When it comes to referrals, it’s important to remember that you don’t have to hire every candidate referred to you. Work with your restaurant’s legal counsel to have program terms in place that clearly outline the stipulations for a referral payout and that you are not required to hire referrals. One idea: The referred employee must work at your restaurant for 90 days before the bonus is given to the employee who referred the new staff member.
Once you’ve attracted quality candidates for your open restaurant position, the first impression you’ll have of them will likely come from their resumes.
When you’re reading through resumes or completed applications for an opening on your team, it's important to remember that resumes and the people behind them may not be an apples-to-apples match for what you were looking for.
For example, say a candidate doesn’t have any experience working in a busy restaurant environment but they have been a camp counselor overseeing a group of twelve six-to-seven-year-olds. This experience could mean they’re a master multitasker who can simultaneously keep the kids smiling while staying on track with the daily agenda. Skills such as these will translate well to a serving role, and, with some coaching, they will likely be a vibrant member of your front-of-house team in no time. You can teach skills, you can't teach ambition and drive.
To better understand what the perfect candidate looks like, you first need to identify what skills you're hoping this new hire embodies. This should take some time, introspection, and a careful analysis of your current staff to really pinpoint what makes them amazing employees. Dive into the specifics of why they're great at their job and what about them you hope to find in this new hire. Maybe it's their ability to remember a regular customer’s favorite order or their knack for supporting team members in the weeds without breaking a sweat.
Once you have your list of qualities, you can assemble your dream resume for this role. Create a mock resume specific to the role that you’d not only be excited to receive but one whose owner you’d likely hire. Keep this “dream resume” on hand as a reference as you start sorting through the submissions you've received in response to your job posting. Create folders or piles for resumes that have 90% of the qualities you're looking for, 80% of the qualities, and so on. This level of organization will help you easily identify who could be a fit for the role, who definitely isn't, and whose resumes or applications you may want to hold onto should another position open on the team.
While it’s not the only thing you should do to prepare for a candidate interview, researching common interview questions and practicing your answers is a good place to start. While the best answers to these questions will depend on your business’s specific needs, they will help you gain much better insight into a candidate that you won’t be able to get from a resume.
Here are six restaurant interview questions you should ask candidates.
Why do you want to work in the restaurant industry? The best restaurant employees take pride in their ability to provide guests with a wonderful experience: The desire to make people happy is a must. Are your candidates having trouble coming up with an answer? Or are they excited to tell you why they want to be a part of this challenging industry? Hopefully it’s the latter.
What does “hospitality” mean to you? The dictionary defines hospitality as “the friendly and generous reception and entertainment of guests, visitors, or strangers.” A great candidate will sum this up in their own words. Bonus points if they give you an example.
Tell me about your most memorable hospitality experience as a diner. Tack this onto restaurant interview question #2, and see how it connects. Do you feel the candidate is being genuine in their answer? Do they go into detail? This should give you insight into what type of service they will provide to your guests. A thoughtful, detailed answer shows that you’re interviewing someone who will put a lot of thought into their job.
How would you respond if a customer wrote something negative about your service online, which you know to be inaccurate, and you later saw them at the restaurant? Sometimes the best way to smooth over a difficult situation is to leave behind ego. You know you have a great prospective team member when the focus of their answer touches on understanding what happened from the customer’s perspective or understanding how they might handle a situation better in the future to make things right again. If someone has experience in hospitality, you might get a more detailed answer with some examples of how they handled issues in the past. Take note of whether or not the answer aligns with how you’d like staff to handle conflict resolution.
Tell me about a conflict you’ve had to deal with involving your co-workers and how you handled it. It’s easy to focus on guest satisfaction, but being a team player is just as important. With this question, you can judge someone’s maturity level and their ability to overcome difficult situations in a team setting. Patrons absolutely love to be taken care of by a staff that is clearly having fun and enjoying the time spent with their coworkers.
What would your references say about you? If you’re hiring someone new, you will likely ask for a few references. See how the candidate’s answer lines up with the conversation you have with the reference. Don’t forget to close the loop on this very important part of the hiring process.
At the end of the interview you should have a strong understanding of the person sitting in front of you, hoping to be welcomed into your restaurant team. Now it’s time to go with your gut. You know your concept and values best and what it takes to mesh well with your team and customers.
You’ve interviewed candidates and found the perfect person for the job. Now it’s time for the main event: the job offer letter.
The offer letter is more than just an official invitation for employment — it's an additional chance to showcase your restaurant brand to a future staff member and start clearly, openly communicating about your goals, restaurant mission, and values. Your offer letter needs to have a few fundamentals, including the restaurant's name, the date of the offer, the expected start date, and a signature of agreement.
The letter should then briefly cover the basics about the role, its responsibilities, and your expectations, and add in some details about any workplace perks and benefits that make the role and working for your restaurant even more exciting. Consider plugging these in:
A brief welcome message from you and the team
Your restaurant's mission, vision, purpose, and values
Information on benefits and time off
An encouragement to read more in your restaurant’s employee handbook
Give the candidate all the information they'll need to make an informed decision about the role and your restaurant and leave your contact information for any questions they may have.
If your offer letter is excellent, the candidate should have no problem signing, sealing, and delivering it immediately. Include a decision deadline — typically one week after an offer has been extended — as well as the preferred delivery method of the offer letter. Once the candidate has signed, it's your job to follow through with the expectations you've set regarding hours, pay, benefits, and workplace culture.
If you offer benefits at your restaurant, part of your onboarding process will include helping your staff get set up. If your business has 50 employees or more, you are required to provide health insurance under the Affordable Care Act. Consider using a platform like Health Care HQ or others like it designed for restaurants. They have plans for small restaurants, large restaurants, and individuals.
It may seem a little corporate, but setting up a timeline for when you’ll sit down with your new employee over the first few months is a great way to keep track of how they’re doing in the new role, and more importantly, how they’re feeling.
If on a 30-day check-in, you’re noticing that the employee seems a bit jaded or overwhelmed, you can troubleshoot the issue before it spirals out and leads to them leaving.
Even if you only have 15 minutes for a quick check-in on a break, prioritize making it happen. It’ll show that you care about the employee’s success, happiness, and growth.
Finally, it’s good practice to start a file (physical and digital) on each employee where you can keep all their tax forms in one place, plus any certificates of training or other paperwork.
Employee training is essential in the restaurant industry, but many restaurant professionals still haven’t cracked the code on the best way to engage their teams to learn new skills. Is it best to throw new cooks into the fire — literally — on their first day in the kitchen, or to send them home with videos to watch and homework to do?
Turnover rate in the restaurant industry is at 74%, according to the U.S. Bureau of Labor, and the cost of bringing on a new employee is $2,171 per front of house employee, $2,809 per back of house employee, and $15,521 per manager, according to TDn2K. Over time, those numbers can directly impact your restaurant’s bottom line.
Successful staff training can prevent turnover. Rather than a “fail fast” approach to training employees, where employees make mistakes often but are quick to learn, restaurants should test new training methods.
The modern learner is impatient and easily distracted. They unlock their smartphones nine times an hour and won’t watch videos longer than four minutes. You only have a few seconds to grab their attention – even when it comes to restaurant staff training – so how can you get all the important information across and make sure your staff are equipped and ready to take on meal service?
Information snacking is a method that makes information more appealing. It involves creating smaller, more digestible training content that is precise and easy to access. When developing training courses or documentation for your staff, consider dividing them by topic instead of making every training course a deep dive. Make sure information can be accessed at any time on-demand, like online on a website that’s password-protected
Here are five methods you can use to appeal to modern learners:
Video: Provide micro-learning with videos less than four minutes long to keep the attention of your staff. Videos can be uploaded to YouTube (in a private link) for free.
Mobile and tablet training: Make learning mobile rather than banning phones. Phone-checking is a compulsion that’s hard to break, so embrace it: Move away from paper training and make training and information available on a phone or tablet. QR codes that open to an interactive training course are a great way to do this. Provide access to a hospitality focused e-learning platform, like Typsy or Toast University, helping your employees learn, expand their skill sets, and hone their crafts, helping your restaurant succeed in the short and long term.
Peer-to-Peer Mentoring: Certify trainers who can mentor new hires. Being paired with a coworker makes new employees feel more comfortable.
Gamification: Make team competitions or daily leaderboards based on quiz results or training progress. Give out badges, points, or prizes to motivate your staff. Wright’s restaurant, at the Arizona Biltmore, saw that “servers responded really well to the friendly competition and seeing who can top who each day,” according to Avero. Train your staff on new wine offerings, and then create a daily leaderboard for wine sales to motivate them. Wright’s did this and increased revenue by $45,000 year-over-year in wine sales alone.
What specifically should your restaurant staff learn and when? New staff members should undergo orientation and read a restaurant employee handbook, but after that, consider maintaining a regular on-the-job skills training calendar. Training every three to six months will help you keep your turnover rates low by increasing loyalty and will leave you with employees ready to get their jobs done efficiently
You can choose to require staff to individually partake in training at different points in their tenure (like 60 days on the job, six months on the job, nine months on the job, and so on), or you can have the whole team come together for trainings you feel would benefit the group as a whole.
There are some restaurant staff training courses that are often mandatory, like:
ServSafe (Food Handling): ServSafe is administered by the National Restaurant Association and has a number of courses for food handlers, managers, and servers, focusing on food safety, allergens, and more. It’s important that your restaurant can handle, prepare, and store food in ways that prevent food-borne illnesses. Food safety considerations include the practices containing food labeling, food hygiene, food additives, and pesticide residues. Many states require staff to obtain ServSafe certification; find the regulatory requirements for your area here.
Alcohol Server Training: Most states across the U.S. require a license before a person can sell or serve alcohol. Alcohol safety is paramount, so require your bartenders and barbacks to have their ServSafe Alcohol certification — and don’t forget to check if it has expired. BarSmarts by Pernod Ricard is another great resource for bar staff looking to add to their bar skills toolkit.
For servers, training should also include
Menu updates: Whenever there’s a change in the menu — whether to a price, an item, or even an ingredient in a recipe — your servers need to know. They’re on the front lines with your customers, answering questions about certain dishes every day. Train them during your family meal and quiz them at the end of their shifts to make sure they retained the information.
Steps of service: Every restaurant may have different steps of service. They usually start with greeting guests, taking their drink orders, sharing features or specials, taking food orders, delivering the food and checking that everything’s okay after two bites, clearing the table, and dropping the bill. Whatever your steps are, train your staff to follow them.
Workplace harassment training: Harassment in the restaurant industry is a pervasive problem. Servers can experience harassment from customers as well as from fellow staff members. To combat this issue, consider creating a harassment training program with all staff members like Erin Wade, owner of Homeroom, did.
Back-of-house training should include
Shadowing: In the back of house, shadowing is essential. Face-to-face training with fellow chefs on the line can help staff understand exactly how each dish is made. Consider having cooks shadow the front-of-house as well so they understand the full guest experience, from soup to nuts.
Chef training: Different stations in the kitchen have different rules, and it’s important that you pass on the various nuances during training. The new chef can start by doing prep, keeping the station clean, replenishing the mise en place during service, and cooking sides. After a few days of this, the chef on the line can swap, so the new chef is cooking the main dishes while the existing chef is watching. After a week of this, the new chef should be able to pull the station by themselves on a busy day without a problem.
Kitchen safety: Chefs in the back of house should learn a few basics when it comes to safety tips in the kitchen: washing hands after washing raw meats, keeping perishable foods to a refrigerator, keeping cooked food away from cutting boards that have had raw meat on them, learning how to extinguish a fire, learning how to use appropriate knives, wearing safe clothing (including closed-toed shoes), and how to handle burns. Consider having staff complete a ServSafe Food Handler certification.
Workplace harassment training: though they don’t interact with customers, internal harassment is unfortunately also a huge problem in restaurants. Train your staff on what constitutes harassment and what they should do if they experience it or see it happen.
Some restaurants may also choose to “open the books,” providing all employees visibility into the restaurant’s financials. This is called open book management. If you choose to open your books, though, it’s important to train employees so they understand the metrics they’re looking at:
Revenue by shift, day, week, and month
Revenue per menu item, including specials
Cost of goods sold
Cost of staff (but not individual salaries or pay rates)
Cost of benefits provided to staff (health insurance, comped meals)
Cost of property lease, utilities, and any vendor services
Loss from inventory waste or comped tickets
Debt from loans, advances, or investor pay-out
Not every server or line cook has aspirations to operate their own business, but for those who do, watching your success and failures from the front row gives them something even business school students don’t often have access to.
Making a schedule that balances employee availability, maintains labor law compliance, prevents “clopens” (when a restaurant staff member closes the restaurant, then opens it the next morning), and ensures your top performers are working on your most popular shifts can make you want to pull your hair out.
Before you’re ready to make a schedule for your staff, it’s important that you know and understand restaurant scheduling-related laws and regulations, like fair scheduling laws and overtime laws. Failure to maintain compliance could have costly consequences.
Fair scheduling laws — sometimes referred to as predictive scheduling laws, secure scheduling laws, predictable scheduling laws, or restrictive scheduling laws — outline the legal rights of hourly workers and the legal responsibilities of their employers with regard to scheduling. Though the specifics of fair scheduling laws will differ from state to state, they tend to include stipulations around:
How far in advance a schedule must be distributed to an hourly employee
How many times a schedule can be changed once distributed to an employee
Compensation requirements for on-call hourly employees
Legally mandated break time between shifts
Legally mandated break time during a shift
How long an employer of hourly workers must keep scheduling records
To learn about the predictive scheduling laws in your state, reach out to your state’s Labor Commissioner's office.
The Fair Labor and Standards Act [FLSA] states that restaurant employers are legally obligated to pay any hourly or non-exempt salaried staff member an overtime premium — typically 1.5 times their usual hourly wage — when said employee exceeds a 40 hour work week. A work week is largely defined as seven consecutive 24-hour periods.
Time and a half is the term we commonly use to refer to the above mentioned “overtime premiums.” Restaurant management typically use the phrases “time-and-a-half” and “overtime” interchangeably.
Now that you’re familiar with the legal requirements related to restaurant scheduling, let’s break down how to make a schedule for restaurant staff that checks all the boxes.
Making a schedule for a restaurant will depend on:
Your concept (full service, quick service/fast casual, food truck, etc.)
Your hours of operation and the number of shifts per day
Whether you’re making a schedule for front of house or back of house
When it comes to physically making a schedule for your restaurant staff, you have a few options for tools.
The world of restaurant employee scheduling technology has come a long way in recent years. For a long time, restaurants would either create a schedule by hand or use a printed-out Excel spreadsheet. The modern version of this simple scheduling method is using a free, online restaurant scheduling template to make a schedule that employees can access on their phones or computers
Another option is to pay for restaurant employee scheduling software that collects all of your valuable scheduling data — open spots on a shift, employee availability, and hours worked, for example — in one place and helps restaurant management build schedules that factor in these considerations while also maintaining FLSA compliance.
The more robust restaurant employee scheduling software providers will integrate directly with your restaurant point of sale, providing restaurant management with one place to go for labor insights and time tracking.
Here are six digital restaurant employee scheduling solutions worth considering:
Now that we’ve covered the tools available to help you make a schedule, let’s walk through the process of making a schedule for front of house and back of house in full service restaurant concepts and fast casual/quick service restaurant concepts.
Step 1: Break up your hours of operation into eight-hour shifts. The lunch shift/dinner shift model is a great place to start, but it by no means applies to every restaurant. if your restaurant also serves breakfast or stays open late night, add shifts; if your restaurant only does lunch or dinner, remove shifts. Many restaurants have a shorter lunch shift and a longer dinner shift. It is important to know exactly how long a lunch shift is, how long a dinner shift is, and how long a double is so that your schedules don’t violate labor laws and you can know when an employee reaches the overtime threshold.
Step 2: Break up your floor plan into sections. Give every table in your restaurant a number. It’s a good idea to give tables within a row, column, or specific area sequential numbers. Example: the row of high-tops close to the bar is the 200s; the booths on the left wall are the 300s, and the booths at the back wall are the 400s.
Next, calculate the average table turn time for the different seating options in your restaurant. Your two-tops will likely have a different table turn time than your six-tops; your four-tops will likely have a different turn time than your eight-tops. Now you’re ready to break up your floor plan into sections. Print out a picture of your floor plan and write the corresponding turn time on each table type. You want to make sure to balance table types with a significantly faster table turn time with those that are slower; you also want to balance tables with fewer seats with tables that have a higher number of seats. Sections should also be comprised of tables in a confined area.
These are all tactics that keep your restaurant seating strategy running smoothly. You will be able to accommodate parties of varying sizes without worrying about overloading your servers with too many guests; it also should prevent the host stand from double or triple seating (seating parties back-to-back, or back-to-back-to-back, in a section) a server, potentially overloading them and compromising the quality of service they can provide.
For example, you would never create a section with four six-tops, and you would never create a section with five two-tops: In the former, the server would be overloaded with 24 guests to look after at once, in the latter, your server could be overloaded with tables that turn rapidly and may result in a double or triple seating. It’s all about balance.
This step will take some time, analysis, feedback from your front-of-house staff, and trial and error.
Step 3: Consult your employee’s availability, then schedule as many front-of-house staff members as you have sections outlined for that shift. Do not schedule employees outside their available hours. Server sections for a lunch shift will often look completely different than those for a dinner shift. This is mainly because there’s less volume during a lunch shift and tables turn slower, so a server can feasibly handle a larger section without being overloaded. During dinner service, where there is significantly higher volume and faster table turn times, servers have sections that allow them to provide a high-quality guest experience without getting overloaded. As shifts progress and you cut staff members from the floor, sections can be distributed among the remaining staff.
Step 4: Choose a handful of staff members to work both lunch and dinner shifts. Restaurants often do not employ enough people to have a different team on lunch vs. dinner; that’s why the double exists. If your restaurant runs on a gratuity-based model, double shifts typically lead to double the tips, so servers are incentivized financially to work doubles. Schedule doubles based on your employees’ availability and their proximity to overtime laws coming into effect. Again, only schedule staff members for doubles if their availability allows.
Step 5: Choose two closers from the pool of staff members who will be joining you to work the dinner shift. Closers are responsible for closing out the restaurant. They stay until the lights come up, making sure the restaurant looks in tip-top shape and is ready for the next day’s meal service. Some responsibilities include shutting down the point-of-sales, mopping the floors, emptying server-station cleaning buckets, checking the server side work checklist has been completed, etc.
Step 6: Distribute the schedule to your employees at least two weeks in advance. The majority of predictive scheduling laws have stipulations that outline how far in advance hourly workers are entitled to receive their schedule; many states have adopted a two week minimum. Two weeks is the minimum time an hourly worker needs to plan for child care, arrange for transportation, or swap/drop shifts with a fellow employee.
Step 1: Break up your hours of operation into eight-hour shifts. As stated in the front-of-house section above, the lunch shift/dinner shift model is a great place to start, but it by no means applies to every restaurant. Bar shifts can be unique or the same as server shifts — it’s up to you. If you find you don’t have strong alcohol sales during lunch, maybe only schedule one or two people; if you have a great happy hour menu that starts at 3pm (and your dinner service starts at 4), require that the dinner shift comes in earlier to handle the happy hour crowd.
Step 2: Break up your bar into sections. Add one or two additional staff members to handle the service bar. Add one to two bar-backs to support your bar team during service. Seats at the bar have a uniform table turn time, so the above approach to breaking out sections won’t work here. You can create bar sections a million different ways: you can base them off of seats (seats 1-6 are a section; 6-12 are a section) base them off of general areas (you take this half, I’ll take that half) base them off of the shape of the bar (if your bar is a free-standing rectangle, put two bartenders on each long side, one on each short end) or just have a free-for-all (though that’s not recommended). You should also schedule one or two bartenders to cover the service bar. The service bar is the section of the bar reserved for fulfilling front-of-house drink orders input by servers; these are not drink orders coming from bar patrons. It’s a good idea to have your service bar staff be more senior, as they’ll need to be able to recall the specific recipes for the drinks on your drink list from memory very quickly. You should also schedule one, two, or three bar backs, depending on the volume during a shift.
Step 3: Choose 2-3 closers from the pool of bar staff who will be joining you for the last shift of the day. Many bars and restaurants also keep on one bar back to close out the bar. Together, your closing bar staff will make sure the bar is clean, organized, and ready for tomorrow’s service.
Step 4: Distribute this schedule to your employees at least two weeks in advance.
Typically, you’ll want to have your prep cook be the first person in, as they’ll be preparing the ingredients for both shifts. Some prep cooks work from 9am to 6pm and then leave because all the ingredients for the dinner shift are good to go; others work doubles and work as support staff in the kitchen during service. Prep cooks often also sign for shipments that come in throughout the day, so make sure they’re scheduled within the time frame that shipments typically arrive.
The kitchen manager (or general manager), chef, and sous chef come in next, and then the cooks for all the different stations on the line trickle in as well, most arriving at least an hour before service, if not more.
To prevent overtime, schedule the cooks to come in at different times throughout the week. There’s no need to have all hands on deck every single day for hours before service begins.
The dishwasher typically comes in last, just in time for service or just before, because they stay the latest cleaning up after the shift.
Once lunch service is over, whoever isn’t working a double will make sure their station is clean and ready for the next cook coming in to take their place.
When dinner service is over, all back-of-house staff are typically required to clean for at least an hour, depending on the size of the operation, so the kitchen is ready to go for tomorrow — so make sure to include that time in a schedule. The shift doesn’t end when service does.
Step 1: Break up your hours of operation into two shifts: lunch shift and dinner shift, if applicable. Choose a handful of cooks to work lunch, and one or two more to work dinner. Make sure you have a dishwasher scheduled for every single shift. Often, sous chefs and chefs work double after double, which is why they’re salaried employees: Their hourly rate would be way into overtime territory.
Step 2: Choose which cooks will work which stations during each shift. Different combinations of cooks, based on availability, will be in the restaurant every week — and each cook will have different preferences for line stations. But all stations need a cook during every shift. Depending on who’s working a shift, you may have two people who prefer the grill, but one of them will have to take the salad station. When building your staff schedule, make it clear who will be working which station for every shift.
Step 3: Create your schedule and distribute it two weeks in advance.
Step 1: Break up your hours of operation up into eight-hour shifts. Quick service and fast casual restaurant concepts don’t typically ascribe to the “lunch shift/dinner shift” model; many are open early for breakfast, late-night, or 24 hours.
Step 2: Identify how many individual roles exist on the line and in the kitchen. If your QSR or FSR fulfills orders on a line in-front of customers, spend some time thinking through how many unique roles exist on that line and create “stations,” (for example, one person creates the base of a meal, a second person adds proteins, a third adds toppings, etc. If your QSR or FSR needs kitchen support to fulfill orders, spend time analyzing your ticket fulfillment time to better understand how many line cooks should be scheduled per shift.
Step 3: Consult your employees’ availability, then schedule as many people on the line and in the kitchen as you have available roles. You also need to schedule cashiers, and, if your restaurant has a drive through, drive through cashiers and food handlers.
Step 4: Distribute this schedule to your employees at least two weeks in advance.
If an employee makes more than $30 a month in tips, they qualify as a tipped wage employee. Tipped wage employees, typically in the front of house, get a small check every pay period, but they also generally take home tips at the end of every shift, often in cash. Tipped minimum wage is much lower than the standard minimum wage, but it’s made up through tips — and if a server has a slow shift and they don’t make any tips, an employer is required to pay the difference to meet the full standard minimum wage for those hours.
According to the IRS, an employer must ensure that the minimum total tip income reported by employees during any pay period is equal to 8% of your restaurant’s total receipts for that period. The reporting process is done quarterly, through payroll, using Form 941.
The Department of Labor has guidelines for how tipped employees should be paid:
The current minimum wage is $7.25 per hour.
Employers must inform tipped employees of the cash amount of their direct wage — the minimum required cash wage for tipped employees is $2.13 per hour.
The maximum tip credit an employer can claim is $5.12 per hour.
The tip credit claimed may not be higher than the amount of tips the employee earns.
Employers must be able to substantiate that the total wages are meeting all minimum wage requirements.
If the tip credit is not enough to meet minimum wage requirements, the employer must make up the difference.
Deductions for walkouts, breakage, or cash register shortages are illegal.
Overtime is calculated based on the full minimum wage — not the cash wage payment minus the tip credit.
If your employees pool tips, all front-of-house employees contribute their tips to one big pool, which is then divided equally among the contributing staff. Some workplaces also have a tip out system in place, where they must share a percentage of their tips with support staff like bartenders, bussers, and sometimes even back of house. If a server was only paid tips on credit card transactions — not in cash — sometimes restaurants pay out tips to servers in cash at the end of a shift.
All tipped workers are responsible for reporting their tips so they can be taxed. For more info on taxing tips, click here.
The following section is an overview of the payroll-related taxes you can expect to encounter as a restaurant owner or the person who does payroll for a restaurant. It's provided for informational purposes only and not for the purpose of providing legal, accounting, tax, career, or other professional advice. Payroll taxes and the processes around them will vary from state to state, so for detailed instructions and advice about how to approach payroll taxes in your area, consult with an accountant or The Internal Revenue Service (IRS) directly for the most accurate information.
Payroll tax is a wage-related tax paid by a business to the IRS upon paying their employees. According to the IRS, “Your tax responsibilities include withholding, depositing, reporting, and paying employment taxes. You must also give certain forms to your employees, they must give certain forms to you, and you must send certain forms to the IRS and SSA.”
There are various due dates that correspond to different forms — (more info from the IRS about what to submit and when can be found here). As an employer, you must pay social security tax and Medicare tax (which, combined, are known as FICA), and federal unemployment tax (known as FUTA), and submit whichever of the forms listed here by the IRS correspond to your business.
The amount you’ll need to withhold from an employee’s paycheck for federal income taxes is determined by their gross annual pay and your state’s unemployment insurance rate. To calculate your withholdings, you’ll need the employee’s W-4, the most recent withholding tables from the IRA (known as Publication 15-A), the current FICA withholding percentages, the current maximum Social Security withholding amount, and the employee’s gross pay.
For a thorough guide to payroll taxes, click here.
Gross pay is all the money you pay a salaried or hourly employee, including bonuses and overtime, during a given pay period.
Net pay is all the money received by a salaried or hourly employee, including bonuses and overtime, during a given pay period, minus federal and state tax withholdings, as well as any other deductions.
Labor cost is how much you pay for all of your employees to keep your restaurant running. This is typically one of the biggest operating costs, aside from rent and food costs. This includes all wages (salaried, hourly, and overtime), taxes, and employee benefits like bonuses and health care.
There are two important calculations when it comes to labor cost percentage:
Labor cost as a percentage of sales, which is your labor cost divided by total revenue and multiplied by 100 to get a percentage.
Labor cost as a percentage of total operating costs, which is your labor cost divided by your total operating costs and multiplied by 100 to get a percentage.
How long you're legally required to keep your payroll records depends on how the following statements apply to your restaurant:
Keep records for six years if you don't report income that you should report and it's more than 25% of the gross income shown on your return.
Keep records indefinitely if you do not file a return.
Keep records indefinitely if you file a fraudulent return.
If none of the above apply to you, keep your payroll records for three years. There are tons of different scenarios that require you to keep records for longer, so consult this full list from the IRS for more information, and talk to an accountant if you have any doubts.
Still have questions? Refer to this page from the Internal Revenue Service's website.