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In this edition we’re talking payroll… ok so not the most *exciting* of topics but stay with us here. Payroll is really important.
According to Restaurants Canada, the Canadian restaurant industry employed approximately 1.2 million people and generated an estimated $110 billion in sales in 2023. Given the average restaurant’s labor cost is 30–35% of their monthly revenue, that equals to about $35 billion spent on payroll last year. This isn’t a topic to overlook.
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Payroll mistakes you don’t want to make |
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Is switching providers the right choice for you? |
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Do your employees even care about payroll? |
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Don’t let numbers get you down and out. We’re all in this together. <3
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THE MORE YOU KNOW
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Running payroll can be confusing even for those who specialize in it. How are you supposed to know if you made a mistake? Between employees, tips, laws, and taxes, it’s a lot to keep straight. Ultimately, you don’t know what you don’t know. So let’s make sure you’re in the know.
Here’s the most common restaurant payroll mistakes operators make.
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But there’s a lot to know within each of those topics. Read this blog post to get a breakdown of where exactly operators are going wrong so you can avoid making the same mistakes.
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QUOTABLE
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Small payroll mistakes can lead to costly consequences like compliance issues, financial penalties, higher employee turnover, and even lawsuits. Take this story from Leo Smigel, who’s been involved with several restaurant ventures:
“My buddy really got himself into a pickle. He had this cool little bistro that was doing pretty well. You know how it is with small businesses. He had to juggle a ton of stuff himself, including doing payroll by hand. But, let’s be honest, keeping track of all the numbers wasn’t his cup of tea, and he messed up a few times.
Then, out of the blue, these labor audit folks showed up, and man, did they find a heap of issues. They discovered he’d gotten overtime wrong, goofed up the tip records, and even made a few mistakes with the tax stuff. Because of all these mix-ups, he got slapped with some big fines. And the audit was a pain in the neck—he had to dig out all sorts of paperwork and answer a million questions, which ate into the time he should have been spending running his place.
But the thing that really stung was how his staff reacted. Some felt they’d been shortchanged because of the payroll snafus. It took him a good while and a lot of elbow grease to win back their trust.
What happened to my friend was a real eye-opener for a lot of us in the biz. It drove home how important it is to keep your records straight, why you should use a decent payroll system, and how you’ve got to stay on top of the rules and regs. We all learned a lesson from his tough experience.”
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BY THE NUMBERS
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With so many operators and employees combatting inflation the last few years, are things getting any better? According to the Square Payroll Index, when analyzing restaurant worker hourly pay (including base wages, tips, and overtime), yearly growth continued to be higher than the rate of inflation. Even though restaurant workers’ pay growth has slowed since COVID highs, average hourly earnings were up 4.1% compared to the inflation rate of 2.98% as of July 2024.
Researcher Ara Kharazian said, “The result is good news for restaurant workers, but we are starting to see some warning signs of a softening labor market. The rate of wage growth has declined significantly from its 2022 peak, and unemployment, although historically low, has recently ticked up, alongside layoffs.”
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FRIENDLY REMINDER
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Q: How long should you keep your old payroll records?
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In Canada, the CRA suggests 6 years from the end of the last tax year they relate to. But there are some situations that different time periods apply to, like late tax returns and during appeals. Find out more here.
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SURVEY SAID
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Using software can help restaurant operators simplify their payroll process, but what about the employee side of things?
We asked restaurant employees what they’re looking for from an employee app. Many told us they want to be able to view their pay stubs with tip and tax information. They also want to be able to onboard on their own, with access to forms like T-4s and direct deposit, amongst other things.
Here’s the anonymous feedback they left.
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FOOD FOR THOUGHT
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Restaurant payroll is more than just processing paychecks—it’s a critical component of the business’s overall health. Accurate and efficient payroll management ensures that employees are paid correctly and on time, which directly impacts morale and retention.
It also helps restaurants maintain compliance with labor laws, avoid costly penalties, and manage labor costs effectively. In an industry where margins are tight, optimizing payroll isn’t just about keeping the lights on—it’s about driving profitability and sustaining long-term success.
If you’ve been second guessing your current solution, a good place to start is answering these questions:
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💬 Are you hearing back from customer service in 3 hours or 3 days?
↔ Does your labor data sync automatically with payroll?
❌ How often are you correcting mistakes that could have been avoided?
💲 Does your software make direct deposit, tax calculations and withholdings, and overtime easy?
❓ Is your team comfortable using the system or are you fielding several questions a week about how to use it?
🔎 Can you find the data you’re looking for quickly?
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If those questions are reigniting your payroll anxiety, it might be time to rethink your provider.
Read this article that outlines everything you need to know about switching payroll systems. Plus, inside there’s a free implementation checklist you can bookmark for later!
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STORIES FROM THE FLOOR
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And this is why reading (not glancing) at your weekly P&L statement is important. Check out this story from an accountant who saved his client $1400 in monthly processing fees by just digging into the numbers.
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À LA CARTE
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