According to Michael Busch, President of Valiant Solutions, it’s imperative, with all the payroll and human resource compliance issues in the hospitality industry, that restaurants stay ahead of the curve in dealing with them.
The New York restaurant industry is one of the most highly regulated and audited markets in the country. That’s why his company, a workforce management solutions firm, specializes in helping restaurants keep their payroll and HR operations in line with city, state and federal mandates. Busch stated, “In 1988 I purchased Payroll Computing Services, a small payroll company owned by an accountant who focused on the restaurant industry. For the first couple of years I thought he was crazy to concentrate on a single industry.” Busch laughs, “I was trying to branch out into other industries, without much success, until it finally dawned on me that to compete with the larger payroll companies I needed something special, some vertical expertise, and that’s how I settled on the restaurant industry.”
Busch notes he’s not a CPA or an attorney. “I’m someone who has gathered over 25 years of industry experience in the intricacies of restaurant payroll issues,” he says. Busch notes that not being a CPA or Attorney gives him freedom to talk more openly with restaurateurs. There are a lot of gray areas and operators need to know what their options and risks are. “For the most part, these owners are good, hard-working business people trying to comply with an overabundance of regulations.”
Why use Valiant instead of a generic payroll company? “I jokingly say, the restaurant industry has a big target on its back. It’s highly regulated and payroll and HR are not exempt from that. It’s almost impossible to comply, or even just be familiar, with everything,” says Busch. “And class action labor attorneys, the DOL Wage and Hour Division, unions, and individual town boards are all waiting for you to slip up.” He gives as an example, minimum wage. “It’s not something most non-restaurant businesses deal with because, in New York, minimum wage is $8.00 an hour and very few companies would think of paying someone only $8.00 an hour. But in the restaurant industry, because there is tipping, paying minimum wage is very common. In fact, paying less than minimum wage to a tipped employee is the norm. Under current minimum wage guidelines, you can take a tip credit of $3.00 per hour, so you can pay a wage of $5.00 per hour, as long as that individual earns at least $3.00 per hour in tips. Calculating overtime on that $5.00 per hour wage is complicated.
You need to take 1.5 times the $8.00 minimum wage before taking the $3.00 tip credit making the proper OT rate $9.00 per hour, not $7.50. Even just determining which employees need to be paid on an hourly basis as opposed to being paid a salary can be challenging. For years it’s been traditional for restaurants to pay back-of-the-house employees a shift pay or weekly salary. It didn’t matter how many hours you worked, you got $100 a day or $600 a week. However, to be compliant, most of these employees need to be paid on an hourly basis.” This requires pretty extensive bookkeeping. Busch says, “All hours over 40 in a given week need to be paid at a rate 1.5 times the regular hourly rate. In addition, employees working any day with a spread of hours over 10 need to receive an extra hour of pay at minimum wage. The regulations go on and on, and most restaurants don’t have a full-time person to keep track of all this. In larger groups they may have a dedicated payroll person but that individual is so extended that they probably need outside help from a company that understands what the requirements are. One thing that has changed dramatically in the last 10 years is the amount of litigation. “Attorneys are aggressively looking for customers. All you need is a few cases out there to create a tremendous word-of-mouth buzz.” As an employee looking to receive a one-time bonus, you can go to any number of websites for information. “Plaintiff attorneys are trying to pull individuals together into class action lawsuits. It’s made restaurants more aware of compliance issues and how important it is to abide by all the rules.”
“At Valiant, our HR and payroll software gives restaurants a practical administrative solution to deal with compliance. Our team works in conjunction with your administrative staff,” Busch says. “People are willing to pay for quality and service and no one knows that better than restaurant operators. You can get good food in a million places, but it’s service and quality that differentiates one restaurant from another. It’s the same way in my business. Value is usually the deciding factor, not price. Restaurants go out of business so much, but it has been my experience that the ones that take wage and hour compliance seriously, are the successful ones.” Busch continues, “If you treat employees right and find the right partners to help with your HR and payroll functions, you can focus on your food quality and service level, and have a long-running, profitable establishment.”