The Finance Factor

Your restaurant payroll is typically 22 to 32% of your gross revenue. In order to drill down to an appropriate actual total wage for your restaurant or bar, you need to check a few items, and do some research.

STEP 1: Know Your Metrics!

1. This article will help you identify the details surrounding your business, and allow you to create a detailed and accurate budget.

Use the budget in your daily and monthly review to keep payroll costs in line, and run a profitable restaurant business.

STEP 2: Research your Category and Wage Laws

1) Research Sub-Category of Restaurant Industry: Frozen Yogurt Retail, Full-Service Restaurant, Liquor Store, Pizza Delivery or Pizza Dine-In, Sandwich Deli, etc. Compare your budget to industry norms.

2) Local and Federal Minimum Wage. Know your local facts.

3) Employer Tax Contributions. You will need to calculate the Employer’s contribution towards state and federal taxes. Employer contributed state taxes can include unemployment, disability and employment training tax. Federal contributions include FICA (Social Security and Medicare) and unemployment. A restaurant payroll service can assist you with these calculations. The Employer Contribution to payroll taxes can add up to 10-15% or more on top of the base wages.

STEP 3: Create a Budget

1) Calculate budgeted wages. You will need an employee labor schedule, and wage by position. Use a spreadsheet program to create a monthly budget.

2) A detailed wage calculation will include wages by department: Kitchen, Front of House, Management, Bar, Etc.

As an example, here is a basic calculation for one department only:

7.25 minimum wage
8 employees
20 hours per week, average
Calculated wages: $1,160 per week

3) Add in a factor for Employer Contributed Taxes (see above).

4) Identify the Gross Revenue by Month

5) Calculate the Wages as a Percentage of Revenue.
As an example, if your total payroll budget is $15,000 per month, and your revenue is budgeted at $45,000, your %-of-Revenue is 33%. If the calculated percentage is higher or lower than your target, then analyze your numbers carefully to see that they are correct. Let us say your budget was 28%, based on industry standards.

STEP 4: Factors that May Cause Your Wages to be Higher than the Industry

1) Management wages and percentage of wages higher than norm.

1. Do you have managers that overlap departments?
2. Could your bar manager also manage special events?
3. Could you reduce from 4 managers to 3, and spread the responsibilities over the remaining managers?

2) TimeKeeping

1. Do you have a working timekeeping solution?
2. Do you use timecards, punch clock, swipe cards, online timekeeping or even biometrics (fingerprints)?
3. Is your automated timekeeping password protected?
4. Are your employees punching in early or leaving late? Are friends punching them in or out to add hours or cover late arrivals or early departures.
5. The cost of inaccurate or poor timekeeping has been documented to cost restaurants thousands of dollars per year.. You can see industry figures at the Pink Payroll website under the timekeeping tab.

STEP 5: Ways to Use the Payroll Figures to Create a Profitable Restaurant

You may decide to reduce employee hours, and reassign responsibilities in order to stay in line with budget. Or, your advertising may need to increase to bring in more customers to meet your profitability goals.

STEP 6: Control – Get Results!

1) Program your POS software to insure your actual wages and hours scheduled meet the budget, or do this on your payroll timekeeping software. Some software programs allow you to block early or late clock-ins by employees. They may also require an employee to work only the allowed number of hours per week, etc. You may use a timekeeping solution. Options for timekeeping payroll timekeeping include online timekeeping, password protected logins, swipecards, and fingerprint logins. You can see photos and information at.

2) Have a good accounting budget using QuickBooks® or your own system. Enter the details.

3) Track your actual wages to budgeted, both as a percentage of sales and total. You may even drill down by tracking by department, should you have a catering department, a bar, and a full-service restaurant. This often requires knowledge of a spreadsheet such as Excel®.

4) Post targets on the wall next to the timeclock. Have team incentives for staying within budget.

5) Ask your restaurant payroll service or restaurant association what the most common wage-cheating methods are. These include buddy-punching, and implement methods to prevent these.

STEP 7: So How Do You Implement these Time Saving Devices?

1) Work with a firm to help you set up your budget, if you do not feel comfortable doing it yourself. Two places that assist clients remotely for a reasonable fee are Phillips Business Management and Sieber Consulting, both out of San Diego, California.

2) Sign up with your local chapter of the National Restaurant Association (LINK)

3) Hire a good restaurant bookkeeping service. Smaller restaurants will use after the fact bookkeeping. You will be able to track budget to actual. You may ask specialists at Phillips Business Management how they can set you up with an affordable monthly service. They are QuickBooks® specialists. If you would like a local referral, searching in your city for a qualified bookkeeper with related experience, but be careful to check qualifications.

1. A popular POS system that we have found works well is Café Cartel Systems.

5) Have your budget by hours programmed into your POS software or your Payroll TimeKeeping Software. Many software pos programs and payroll services have tools that let you input the schedule into the timeclock so your employees do not exceed their budgeted wage.

6) Use a restaurant specialized payroll processing service. They will have the systems in place to help you manage many of these items. The fees are almost always less than the cost to do it yourself or have a staff member do payroll. Pink Payroll has information on automated timekeeping, webclocks, swipeclocks, online payroll submission that their restaurant clients use to save time and money, and stay within budget.

To make sure your system works, you will research, plan, and then review results. You will continually be modifying your budget as your business grows and changes. Write on your calendar a quarterly task for budgeting and reviewing payroll. This will keep you accountable for results, and in touch with the data that will make your business succeed.

Want to find out more or get a discounted rate? Fill out our online request form and we will get back to you today. Or, you may call us directly. Why don’t you click on this link to Pink Payroll’s Quick Quote Form and come to us to get more information or a quote.

Erica Phillips is a graduate of San Diego State University, Business Administration. She has received honors for volunteer work, including a Congressional Medal presented in Washington, DC for Volunteer work. After positions as a marketing executive at Carnation (Nestle SA) and other corporate marketing, finance and sales positions, she has been an entrepreneur for over 15 years. She advises businesses on marketing, finance and budgeting as it relates to payroll services.

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