How to manage payroll for restaurants

by Nov 20, 2020payroll

One of the questions we get asked a lot is:

What percentage should payroll be for a restaurant?

Restaurants typically spend 20-40% their income on staff wages, so it is vitally important to keep it organised.

Running payroll for our clients in the hospitality industry has taught us that it is most common for staff to be working on flexible rotas. Staff will have a standard contracted number of hours, but they may work overtime, so tracking these hours correctly is essential for producing accurate payroll figures, this can be done using software, excel or even by hand.

One of the first decisions you need to make when setting up a new payroll is whether you are going to run it weekly or monthly. This determines how frequently the staff are paid. A weekly payroll requires 52 submissions to HMRC per year, whilst monthly only requires 12 – less submissions also means there is less risk of late filing and in turn less risk of penalties. We have posted a blog previously which lays out, more in depth, the pros and cons of running a monthly payroll –  If you can run payroll monthly, why wouldn’t you?

Due to the fast-paced environment, the hospitality sector often has a higher turnaround of staff so, you may often find yourself with new starters and leavers on the payroll. A new starter will need to provide their personal details such as their home address, date of birth and national insurance number., as well as this, a P45 from their previous employment or a filled-out starter checklist from HMRC (previously known as a P46) will be needed to ensure they are on the correct tax code and the right deductions are being made. In the event someone leaves your employment, a P45 will need to be issued and they will be removed from the payroll in a final RTI submission.

Tracking employees holiday entitlement is also key to keeping an organised payroll system – a member of staff working regular hours will be entitled to 28 days holiday throughout the year. For employees working on a flexible rota, this calculation must be adapted. 12.07% of hours worked are allowable as paid holiday entitlement.

One payroll mistake could lead to a valued employee leaving or a very unhappy employee at the least.

Here at Diamond Accounts we live and breathe payroll services and we’re only happy when you and your staff are happy so get in touch today to see how we can help you!


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