Five Questions to Ask When Considering a Payroll Service Provider

“When you’re looking at being a small business owner, you want to focus on growing your business, not on administrative non-revenue-generating functions that come with an element of risk,” says Steve Cohen – and as VP of Payroll Sales at Dallas-based benefit and payroll service bureau BenefitMall, he knows about administrative functions.

“Running payroll doesn’t make the restaurant any money – this is a function of the business that’s not taking care of their customers and is not providing great food service, and it’s one of the functions of the business that comes with high risk and low reward – so outsourcing payroll in general is a great business decision for small business owners.”

But while choosing to outsource payroll responsibilities might be a no-brainer for restaurant owners and franchisees, choosing the right payroll service to fit your needs can be overwhelming. “There are unique factors that a business owner, whether it’s of a small restaurant or a multi-chain restaurant, needs to consider when looking at a payroll service bureau,” says Cohen. Keeping these factors in mind can help you find the right service to keep you and your employees in the clear.

1. Are You Compatible With My Systems?

“The first item of interest should be: how are they going to get data from their Point-of-Sale system into the payroll system for payroll processing?” says Cohen. “You want to know whether or not your payroll service bureau can integrate with your selected POS system. There are hundreds of POS systems out there for the restaurant space, there are some very common POS systems that are used in your more prominent restaurant chains – does your payroll service bureau integrate with that?” The last thing you want to do is partner with a service only to find out that their tech doesn’t mesh with your own.

2. Are You Helping Me Make the Most of Available Tax Credits?

“Restaurants are eligible for what’s called a FICA tip credit, and that’s a credit of tips captured and rate of pay – depending upon your profitability as a restaurant, you can be subject to a FICA credit,” says Cohen. “So you want to make sure your service bureau can capture tips reported on a per-payroll basis, so you can have the data necessary to file for your FICA tip credit.”

Without that type of data capture, a restaurant could be losing out. “Larger restaurants do this as a standard business practice, but a lot of startup restaurants or folks entering into the restaurant space may not be taking advantage of this when they should be,” Cohen explains. “It’s out there, and it could be significant. If they are a profitable restaurant and they have waiters and waitresses receiving tips, and if they’re not capturing that and reporting it correctly through their payroll system, they are leaving money on the table. So they want to make sure that their service bureau can capture this data effectively and provide them with the necessary outputs so that they can report on their taxes.”

3. Can You Help Me Manage Spread of Hours?

Payroll is all about the employees, but when it comes to managing hours and cashing employees out at the end of the night, things can get more complicated than simply handing out a paycheck. In that case, it can pay to have a payroll service capable of handling such issues.

“When it comes to reporting in certain areas of the country, certain markets and certain cities require what’s called ‘spread of hours,’ where they’re tracking very specific hours worked within a certain job and within a certain time period – this is becoming bigger and bigger in many large marketplaces where there is a heavy concentration of restaurants and part timers,” says Cohen. “In order to stay in compliance with these state regulations on how they’re capturing hours and reporting on hours worked, the payroll system needs to be able to manage spread of hours. BenefitMall has this embedded into its payroll reporting, as well as the way in which we capture data on the front end, so that you can capture time worked to report on spread of hours.

“Additionally, many restaurants have challenges associated with reporting both what was captured in dollars and credit cards, and how they allocate those dollars and hours worked when they cash out at the end of the night,” he adds. “They want to make sure that their payroll service bureau and the time keeping system that they’re using is captured at point of sale and then flows into payroll, that payroll has flexibility of allocating by a certain dollar amount or a percentage when it comes to employees being cashed out at night, and when they receive their checks.”

4. Can You Help Me Stay ACA Compliant?

One issue on the mind of every small business owner this year is the implementation of the Affordable Care Act (ACA) employer mandate, and restaurants are feeling it more than anyone else. “Because restaurants have a high concentration of part-time people, high turnover, and unique ownership structures, they are really being challenged in a way by staying compliant according to the ACA guidelines,” says Cohen.

Because of this, finding a payroll service that can help you navigate these new legislative waters is vital. “Restaurants absolutely hands down today have to be asking their payroll service bureau what levels of service they can count on to help them stay compliant with the Patient Protection and Affordable Care Act, or PPACA, and the employer mandate for 2015 and beyond,” says Cohen. “The question that they want to ask is: what level of reporting can you provide me to help me stay compliant? Are you going to help me analyze my part-time employees, my full-time employees, and my seasonal employees? Can you provide me the data necessary that would allow me to apply for any tax credits if I do offer health insurance? You’ve got to make sure that your payroll service bureau can capture the data for you and report on the date for you to ensure that you’re staying in compliance.”

5. Are You Analyzing the Data You Collect to Help Me Make the Best Decisions for my Business?

“Most of your large payroll service bureaus are providing some level of reporting for the restaurant owner to allow them to capture full-time data, part-time data, seasonal data, and hours worked,” says Cohen. “However, that’s just data: it doesn’t help a small business owner analyze whether or not they’re providing plan affordability and plan value, or whether they’re meeting the requirements of the employer mandate.”

According to Cohen, added data analysis services like BenefitMall’s All Check Pro can dramatically help a business when it comes to making good decisions based on their payroll data. Without that, it can be easy to get lost in the language of ever-changing laws and fall behind.

“Restaurants today that are running anywhere from 1-50 employees have very limited risk; but as the employer mandate kicks into gear in 2015 and the thresholds get lowered, these small business owners could be subject to some hefty tax penalties associated with being out of compliance,” he says. “The way in which the employer mandate works today is a very complicated assessment. If they’re not getting help from their CPA or from their insurance broker partners, and if they’re not getting the necessary data from their payroll service bureau, they could easily fall out of compliance and not know it.”

This is especially true for franchisees, who may own several locations must make decisions that a small single-location restaurant would not have to consider. “Say I have a Subway franchise and I own six of them: each franchise might have only 15 employees – but if you combine them, because I have majority ownership, I’m now subject to ACA,” says Cohen. “As we start to hover around the summer months of July and August, companies are going to start to really focus on whether they are in or out of compliance.”

“Because the payroll service bureau owns the data, customers are relying on us to provide more than just reporting,” says Cohen. “They’re asking us for guidance.” With the right payroll service, you may find your way to a more efficient business that lets you spend less time worrying and more time focusing on doing what you love.