As Minimum Wages Rise, Restaurants Are Getting Smarter About How They Manage And Track Costs

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Article contributed by Valiant Solutions

Across the country, the minimum wage increases are designed to help support the increased cost of living for families. Especially in major metro areas like New York City, this can come at a significant cost to the employer. Many are struggling to maintain their profit margins and are looking for ways to offset the increased costs. For some it’s an inconvenience, but for others it can mean closing their doors in the face of increased competition and turnover from staff.

In wake of these wage challenges, forward-thinking businesses are turning to technology to help them get more streamlined in how they handle their operations. For smaller businesses, the process behind managing a staff and their payroll has been often manual, and/or cumbersome. Restaurants are looking for ways to allow them to incorporate intelligent technology to automate the process of calculating wages to ensure that they are meeting the minimum wage standard, but also keeping ahead of their costs.

Leveraging Intelligent Payroll Management Systems to Calculate Wages more Effectively

One such way is through more effective, intelligent payroll management. A lot of the challenges with meeting minimum wage is calculating the proper wage rates with tip credits to meet the minimum standard. With payroll management, the payroll automatically looks at the wage rate, the tip allowance, and ensures that the wage rates meet the minimum wage requirements.

This visibility means that you can set the wage rate at an acceptable level to ultimately roll up to minimum (for example, wage rate set at $10 per hour to reach the minimum wage with tips of $15/hour). On top of this, you need to allocate the appropriate withholdings on taxes or any benefits associated with that employee. This can be a complex task, especially when you are managing a larger staff. Payroll management enables businesses to apply automation into the equation and do the calculations on the backend for them, with no errors or issues with compliance to the new standards.

Taking Advantage of Tax Credits and Incentives to Get Back Costs

Another area that businesses are leveraging to offset the wage increases is by taking advantage of tax credits for their staff. Many that do not have dedicated human resource managers on staff often will overlook these potential credits, in which they could be leaving money on the table for hiring eligible employees. For example, the Work Opportunity Tax Credit, or WOTC, is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. This is no small incentive; credits for eligible employees can vary from $2000 for a small operation to well over $50,000 for larger operations.

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Similarly, restaurants that offer meals to their employees are available to submit meal credits that are 50% tax deductible for each meal. These are significant credits that can be easily integrated into your workforce and helps to offset any costs within your operations. The biggest challenge in implementing them is proper reporting on these meal credits. By having a solution that makes these advantages more visible to your operations, you can take the administrative burden off researching and processing, and have the solution help you to realize these potential costs.

As an example of the impact on meal allowance credits, the significance of pre-tax meal credits can be expansive when you look at your whole operation:

  • $3.25 meal cost per employee x 5 meals a week = $16.25/week
  • If you have 50 employees, this equates to $812.50/week that is tax exempt

If you do this throughout the year, that’s over $42,000.00 of annual savings. This is a significant savings with just the proper payroll management in place!

Visibility into Payroll to Assess and Reduce Overtime

When you are looking to try and maximize each employee’s work schedule, incurring overtime when you don’t need to can add a significant burden on your costs. The challenge is that when a schedule is made, and with shifts swapping and changing, it can be difficult to manage. One thing companies are getting more attuned to is creating visibility into their payroll and the overtime that each employee is taking, versus other employees that are under hours.

With proper visibility into the schedule, and how this is reflected in payroll, you can better manage your staff so that, when you set a schedule, you can see which employees have had more overtime than others and make decisions on how to staff your shifts going forward. Businesses and employees end up benefiting from this visibility; the employees are all getting a full and equal amount of work, and the employer is minimizing the amount of overtime they have to pay. But in order to even know what you’re paying, you need visibility into both your time and scheduling and your payroll management.

Getting Flexibility in Meeting ACA Compliance and Benefits Management

If you are a business that has over 50 employees, you are subject to the Affordable Care Act (ACA). This means that you MUST provide coverage options for you employees. There are a few challenges here. Some smaller organizations will try to circumvent the ACA by simply not reporting, or not offering coverage, hoping to avoid detection. This is not advised; the IRS is cracking down on ACA violations in record numbers, and the cost for failing to provide coverage can reach an average of $2300 per Full Time Employee (FTE). This is a risk many should think twice about. The other challenge is finding coverage that provide enough for the employee but doesn’t hurt operating costs.

Many businesses are starting to take an approach of leveraging benefits management systems that provide a variety of benefits options to help offset the costs. Minimum Essential Coverage (MEC) plans, commuter benefits, and Flexible Spending plans that are managed through Benefits Management services help businesses to get the best possible rates, which minimize their costs to provide coverage to their employees. With rising wages, offering benefits that will be competitive and provide a cost reduction help to keep the business running when wages increase.

As a service industry, the brand power comes from the services delivered. The ability to deliver an experience is key to driving a repeat customer base and drives revenue. The experience is a combination of food, atmosphere and people – these elements are what drives the value of the business to the consumer. Companies looking to continue to deliver an experience need to find ways to streamline operations, especially in their workforce to gain efficiencies that can help maintain profitability.


Valiant’s hospitality solutions feature easy integration with your POS system, calculate meal credits, accurately report on tips and ensure compliance with spread of hours pay, all in one place. Learn more at their website