1. One Size Doesn’t Fit All:
Restaurants Need a Payroll Expert

2. ©2015 Heartland Payment Systems
The Penalties on Restaurants are Severe
§ There are nearly 75,000 pages
in the IRS tax code and
approximately 4,000 annual
changes to federal, state
and local tax codes
§ 40-45 percent of all small
business—and restaurants—
will incur a tax penalty this year

3. ©2015 Heartland Payment Systems
Restaurants Face Special Payroll Challenges
§ Tipped Employees
§ Direct Tips vs. Indirect Tips
§ Cash Tips vs. Credit Tips
§ Under-Reporting of Tips
§ Shortfall Management
§ Minimum Wage
§ Year-End Tip Allocations
§ FICA Tip Credit Opportunity

4. ©2015 Heartland Payment Systems
10 Critical Restaurant Payroll Issues
Tax Compliance
Expertise
Time Constraints
HR Compliance
Employee Satisfaction
Tipped Employees
Adherence to Minimum
Wage Requirements
Shortfall Management
Tip Allocations
FICA Tip Credit
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5. ©2015 Heartland Payment Systems
Payroll Challenge #1—Tax Compliance
§ One out of every three
employers pays a payroll-
related tax penalty each year.
Those companies, on average,
had six penalties during
the year
§ Companies that process
in-house are three times more
likely to receive a penalty notice
than those that outsource1

6. ©2015 Heartland Payment Systems
Payroll Challenge #2—Expertise
§ In-house payroll administrators
rarely monitor tax code
changes, legislative rulings
and other impacting items
§ When administrators leave
the organization, so does
their knowledge
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7. ©2015 Heartland Payment Systems
Payroll Challenge #3—Time Constraints
§ Payroll is a high priority,
consuming 80-120 hours
each year
§ Restaurants with 50+
employees are triple that
amount
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8. ©2015 Heartland Payment Systems
Payroll Challenge #4—HR Compliance
§ Staying on top of labor laws
and managing compliance is
challenging
§ The Affordable Care Act, changes
to minimum wage, updates to
federal forms, required postings,
OSHA regulations, etc. are
constantly evolving
§ Filing new-hire information
and handling garnishments
must be routinely administered
§ Maintenance of job descriptions
and company handbooks are vital
for protection against lawsuits
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9. ©2015 Heartland Payment Systems
Payroll Challenge #5—Employee Satisfaction
§ Payroll accuracy
§ Availability of direct deposit
and/or payroll debit card
§ Online access to retrieve pay
statements, W-2s, etc.
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10. ©2015 Heartland Payment Systems
Payroll Challenge #6—Tipped Employees
§ Must maintain a record of tip
declarations for all tipped
employees
§ Tip declarations must be collected
at least monthly—typically on a
per payroll basis
§ Paid and unpaid tips should be
recorded as separate earning
types in the payroll system.
Unpaid tips must be paid out
as part of payroll process
§ Separating cash tips vs. credit
tips, and direct tips vs. indirect
tips, may be important based
on the policies of the restaurant
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11. ©2015 Heartland Payment Systems
Payroll Challenge #7—Adherence to Minimum Wage
§ Tipped employees can be
paid an hourly rate below
minimum wage
§ Minimum hourly rates do exist
for tipped employees as well
§ Most states require that
a tipped employee’s total
earnings (hourly rate + tipped
income) meet or exceed
minimum wage
§ Minimum wage requirements
should be routinely measured
each pay period
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12. ©2015 Heartland Payment Systems
Payroll Challenge #8—Shortfall Management
§ Tipped employees who receive
substantial tips paid out at the
end of a shift can often end
up with a “net zero” check
§ These “net zero” checks often
result in employees not having
enough earnings to offset all
taxes and/or deductions
§ These shortfalls must be tracked
and managed to avoid issues of
noncompliance
§ Tax shortfalls, particularly with
FICA taxes, must be tracked
and repaid on a future check if
possible. If not, FICA shortages
must be reported on a W-2
§ Employers must also account
for voluntary deductions
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13. ©2015 Heartland Payment Systems
Payroll Challenge #9—Tip Allocations
§ The IRS requires most restaurants
to report tipped income of at least
eight percent of gross receipts
§ Restaurants must measure this
to ensure compliance. If reported
tipped income falls below eight
percent of gross receipts at the end
of the year, tip allocations should
be provided to tipped employees
§ Tip allocation determinations
should be completed using
accepted accounting standards
using hours worked or gross
receipts methodology
§ Allocated tips are simply added
to earning for purposes of W-2
reporting
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14. ©2015 Heartland Payment Systems
Payroll Challenge #10—FICA Tip Credit
§ The IRS allows for restaurants
to take a business tax credit base
on the FICA taxes paid on tipped
income
§ Restaurants can see hundreds
or even thousands of dollars in
tax credits per tipped employee
per year
§ A restaurant with 10 tipped
employees, who work 40 hours
per week, make $3 per hour, and
$400 per week in tips would have
a FICA Tip Credit for the year of
approximately $12,000
§ It is estimated 70-75 percent of
restaurants to not take advantage
of the FICA Tip Credit program
§ FICA Tip Credits would far exceed
payroll service fees on an annual
basis
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15. ©2015 Heartland Payment Systems
Selecting a Restaurant Payroll Expert
§ Expertise—Are they experts
in restaurant payrolls?
§ Service—Does their service
model fit your service needs?
§ Price—Do they offer value
and is there integrity in their
pricing model?
§ Technology—Can they
interface with your POS
and accounting software?
§ Reputation—Do they deliver
in areas of accuracy, timeliness
and support?
§ Fit—Do they offer everything
you need? Are they too big
to deliver personal service?
Can their service grow with
your company?

16. ©2015 Heartland Payment Systems
The Heartland Restaurant Payroll Benchmark
Recommended
by the NRA
and 45 state
associations
One-to-One
service
model
Three-year
locked-in,
all inclusive,
transparent
pricing
Online services
with integration
capabilities with
leading restaurant
POS systems
and accounting
software
Highest rated
level of customer
satisfaction out
of all Payroll
providers*
* Net Promoter Scores 2013, 2014, 2015

17. Thank You