Credits + Compliance = Cash (for restaurant owners)

April 5, 2012 | by Rick Casmass

I’ve been in the restaurant industry, in one form or another, for well over 20 years. In that time, I’ve seen some very smart owners make some of the very same mistakes, over and over. There are two issues in particular that I’d like to talk about. In both cases, owners are either leaving money on the table, or inviting the scrutiny of the Department of Labor (DOL).

First, let’s discuss “shift vs. hourly” employees. The cultural mindset of the restaurant industry is to pay employees by shift. The motivation isn’t to “short” anyone, owners just think it’s easier. But is it really? The truth is, if your restaurant has more than 50 employees, it’s very easy and convenient to generate payroll based on hourly pay. And in fact, if you pay all of your employees by shift, you run the very real risk of attracting the attention of the Labor Department. The DOL realizes that restaurants typically employ both shift and hourly employees, so if your payroll register is lopsided toward shift employees, it will stick out like a sore thumb if the DOL ever had occasion to review it.

I can tell you from personal experience that shift vs. hourly is one of the easiest compliance items to fix, if you have the proper knowledge.

Next is the meal allowance. Let’s say you’re the owner of a restaurant and you provide meals to your employees. If you’re not taking advantage of the meal allowance you are leaving money on the table.

But you’re not alone. Not taking the meal allowance is by far one of the most common mistakes I see restaurant owners make. Owners may think it’s “petty” to deduct a few dollars from their employees for meals, but the amount of money over the course of a year added back to your bottom line can be substantial.

For example, using the New York meal allowance of $2.50 per meal and 100 employees working 5 qualifying shifts a week the calculation of annual savings would be as follows:

  1. $ 2.50 x 5 = $12.50 meal allowance per employee per week
  2. $12.50 x 100 ees = $ 1250.00 total meal allowance per week
  3. $1250.00 x 52 weeks = $ 65,000 SAVINGS PER YEAR

In addition, we often find that even if the meal allowance is being processed, it is done incorrectly. The tax law states that the meal allowance can be deducted from the employees gross wages BEFORE calculating certain employer taxes. This adds an additional $ 4,972.50 bringing the total of $ 69,972.50 back to the bottom line income of the restaurant.

What I tell my clients is: Your employees don’t work for you for their minimum wage, they are there for their tips. Yet, the state bumps their pay a few cents an hour periodically and your bottom line takes a big hit. Here’s a rule of thumb that can help: when there’s a minimum wage increase, that’s the perfect time to institute a meal allowance policy you may not have taken advantage of in the past.

I’ve actually conducted employee meetings to explain to restaurant workers that if their boss takes all the allowances he or she is eligible for, it actually protects their jobs, because it can make the difference between him or her keeping the restaurant fully staffed.

So whether it’s shift vs. hourly, meal allowances, or any of the other restaurant employee-related issues, talk to an expert. Because the more you know, the more you can add to your bottom line.

Topics: Business Strategy and Profitability , Consultant / Analyst , Human Resources , Industry Services , Legal Issues , Operations Management , Staffing & Training

Rick Casmass / Rick has spent more than 25 years serving the restaurant industry, both as a service provider and participant. Currently, Rick is vice president of sales for Valiant’s Restaurant division, where he leads a team of sales consultants who perform risk mitigation audits for restaurant operators.
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