How To Calculate and Track Your Restaurant Payroll Percentage

One important way of cutting your labor cost percentage that might easily be overlooked is focusing on keeping the employees you have. If the restaurant is only half-booked and you still have a full staff on the floor, your sales decrease by half, which effectively means your labor cost percentage doubles. Looking at labor costs for different groups gives you a clearer picture of how you’re spending money on staffing.

• Later in this piece we’ll discuss strategies to manage and reduce your cost of labor.
• Processing payroll is a complicated but essential task for restaurant owners, operators, and managers.
• Hiring someone to do payroll will vary drastically on the size and type of company.
• Controlling labor costs is a matter of paying close attention to customer traffic flow patterns and adjusting staffing so you have more staff available when you are busy and less staff when you are slow.
• If you’re not using software, scan paper records and upload them to Google Drive or a similar cloud storage service to ensure you don’t lose them.
• If the company is small, a CPA or other professional firm might cost anywhere from $2,500-$5,000 depending on complexity (losses, employees working in more than one state, etc).
• Sam of Sam’s Smoothie Shop wants to know her labor cost percentage for the year that just ended, 2020.

What Is a Payroll Management System?

First, ensure your onboarding training sessions are thorough, and conduct refresher training sessions on a regular basis. Use employee performance reviews to evaluate supplementary training needs. Another way to keep turnover to a minimum is to implement user-friendly technology that doesn’t frustrate or intimidate new staff. For instance, when Café Crêpe payroll for restaurants switched from a legacy POS to TouchBistro’s user-friendly iPad POS system, staff turnover dropped dramatically in just the first 30 days. You won’t break the bank to implement the solution, which offers the basics and a user-friendly interface. They can also take advantage of its messaging capabilities to securely communicate with coworkers and managers.

• You can set a goal to keep your labor cost percentage under, say, 30%, and build a monthly or quarterly budget based on that number.
• If you’d like to learn more about optimizing your labor costs and tracking data for payroll processing, schedule a Restaurant365 demo.
• As the anthropologist Katherine Newman noted, welfare beneficiaries typically worked full time, but as mothers and caretakers, not wage earners.
• This is a separate checking account exclusively used to pay employees.
• These individuals would be first cut for lunch (to ensure they have enough downtime between shifts to make it valuable for them) and first cut for dinner (to ensure they don’t spill into overtime).

Plan the Schedule Using Staff Scheduling Software

Some states have state payday requirements stipulating when employees should be paid, but several allow you to decide for yourself. Employees can be paid on a monthly basis, a weekly basis, or using a two-week pay cycle – the most common pay period in the hospitality industry. Now that you’re familiar with the basics of payroll for restaurants, it’s important to familiarize yourself with some important requirements that must be met before you can actually start processing payroll. In addition, you will need to track your own deductions that you can take as an employer. For example, as an employer, you may be able to deduct the cost of providing meals to employees at your restaurant as the cost of food or as a separate expense. For a more-detailed look at the process, check out our free guide on mastering restaurant payroll.

How to create a payment schedule for your restaurant

An EIN will serve as your business’s tax identification number during the process of filing taxes for your business. It’s also your unique identifier for any paperwork involving the IRS, Social Security Administration (SSA), and Department of Labor (DOL). As discussed earlier, proper staff training is key to getting the most out of the employees you have. The most scalable and repeatable way to train staff is through organized programs. You might have a server training program, a cook training program, a hostess training program, etc.

When times are tough, it is more important than ever to keep your eye on your costs. Your restaurant operations include many different expenses, from food and beverage to utilities. However, your labor payroll cost is one of your most significant expenses—and, crucially, a significant expense over which you have control. The Kansas Department of Revenue has issued new tables for the percentage method of withholding for 2024. The Kansas Department of Revenue has directed that employers should implement the 2024 withholding rates as soon as possible. Therefore, the attached tables will be used for computing state tax withholding for wages paid on or after October 11, 2024.

• You’ll need to consider several factors, including the size of your restaurant and how many locations you manage.
• Ideal for small restaurants using Square POS, Square Payroll is affordable and easy to use.
• The current FUTA tax rate is 6% of the first $7,000 of wages, although many businesses qualify for state tax credits that bring it down to only 0.6%.
• Under the FLSA, there are special provisions for the payment and taxation of tipped employees.
• Your restaurant’s labor cost percentage is the total amount of money you spend on labor costs — including salaries, wages, healthcare, benefits and taxes — shown as a percentage of food sales.
• The easiest way to maintain proper records is by using payroll software.

What Makes Up Your Payroll Costs?