Avoiding Common Payroll Mistakes in the Hospitality Industry
Running a restaurant, café, or takeaway is no small challenge, and payroll management often tops the list of most tricky tasks. And while no one starts a restaurant with the desire to manage a staff payroll, getting it right is essential. Missteps here can cost you precious time, and even some costly headaches from the taxman later on.
So, let’s take a quick look at some of the common payroll blunders in the hospitality industry – and how you can avoid them!
1. Mixing Up Pay Rates for Different Roles
We understand – your head chef, wait staff, and part-time cleaner all have different pay rates. But when staff work varying shifts and occasionally cover different roles, payroll mistakes can easily happen. Accidentally paying your kitchen staff as waiters or miscalculating overtime for your cleaning team can lead to unhappy employees and an admin headache.
Our advice: invest in a reliable payroll system or software that tracks hours and pay rates for different roles automatically. It might seem like a big leap, but it’ll save you a lot of manual correcting down the line.
2. Forgetting About Holiday Pay
In the rush of day-to-day operations, it’s easy to lose track of your employees’ holiday pay – especially with a rotating door of part-time workers. But not offering the right amount of holiday pay, or forgetting it altogether, is a surefire way to run into trouble.
Keep track of each employee’s holiday accrual and ensure it’s being applied correctly. A good payroll system will help you stay on top of this. If you’re unsure how holiday pay works for zero-hour or part-time contracts, ask us – we can help!
3. Miscalculating National Insurance and Pension Contributions
When it comes to National Insurance and pensions, things can get tricky – especially with a mixed workforce of full-timers, part-timers, and casual staff. If you’re not calculating these contributions correctly, you might end up under or overpaying, which can lead to penalties or confused employees.
Stay updated on the latest contribution rates and make sure your payroll system adjusts automatically. If you're unsure about the latest regulations, we can help you stay in the loop.
4. Muddling Up Staff Tips
Tips play an important part in many hospitality workers’ pay. But are you handling them correctly? Whether it’s cash tips, card tips, or tips shared through a service charge, the tax treatment can vary. Confusing? Absolutely. But getting this wrong could mean tax penalties down the line.
So, set up a clear system for handling tips and make sure everyone knows how it works. It’s important to know when tips are considered part of wages and how to report them properly. We can help you figure out the best method for your business and keep you compliant with HMRC.
5. Missing PAYE Deadlines
Missing PAYE deadlines is more common than you might think. But late payments or submissions to HMRC can result in penalties – the last thing any business needs. To avoid this, set reminders for key dates, or better yet, use payroll software that sends out alerts when PAYE submissions are due. If you’re feeling overwhelmed, outsourcing payroll management might be your best move.
6. Not Keeping Records Organised
We've seen first-hand how chaotic things can get in a busy restaurant, and so paperwork can often take a back seat. But payroll records are essential for tax purposes and protecting yourself in case of any disputes. HMRC requires you to keep certain payroll documents for at least three years, so keeping everything in order is a must.
Consider digitising your records to save time (and paper!). Use cloud-based payroll software that keeps everything neatly stored in one place. If you ever need to refer to old payroll records, you won’t have to dig through stacks of paperwork.
Key Takeaway
Getting payroll right in the hospitality industry can somtimes feel like a circus-level juggling act. But avoiding these common mistakes will save you time, money, and a lot of hassle in the long run. If payroll feels like one more thing on your overflowing plate, don’t hesitate to reach out to us.
Restaurants, cafes, and takeaways can benefit greatly from working with a specialist accountant. If you hadn’t noticed already, we are specialist accountants in Leeds for food service businesses, so unlike most accountants, we have years of experience working with businesses just like you. If you're interested in finding out more about how we can help your restaurant become more profitable, book a call with one of our accounting experts or call us on 0113 240 4100.
