Work Comp and Payroll Solutions for Restaurants

Restaurants and catering businesses are ideal candidates for PEOs due to the large number of part time employees and shift work.

food-service-tableFood service businesses do have a high incident rate of work injuries. The rapid pace in the kitchen combined with the confined work space, is virtually, in every instance, an accident waiting to happen. Most work related injuries in kitchens involve burns, scalds, back injuries due to lifting, cuts and broken glass wounds, and slipping on wet floors. And, despite training and safety precautions, the frequency of accidents is always high. These drive up the Experience Modifier for the business and are a direct contributor to increased Work Comp rates. and lower profits.

Stay Compliant With IRS & Department of Labor (DOL) Rules

IRS rules for tips and other non-standard remuneration income also need to be correctly interpreted and followed. Both the employer and employee have certain obligations under the IRS code to track and report tips. Failure to do so by either party can result in significant penalties in the event of an audit.

HR compliance for a large number of part time workers, especially for shift work, is a complicated topic. The recent Health Care Reform has narrowed the definition of a full time employee. Employers are required to submit complex labor reports to determine the number of full time or full time equivalent employees, which will dictate if employee health care needs to be offered.

Other issues are EPLI & DOL discriminatory complaints, especially with respect to wait staff schedules, age, race & gender. Complaints to the EEOC and DOL do trigger investigations by both government agencies.

The Fair Labor Standards Act, (FSLA) also mandates the minimum wage a restaurant employee making tips can earn. If the employee does not earn the minimum wage, after tips are distributed, the employer is required to make up the difference. Non-exempt employees are entitled to overtime pay of one and one half the standard wage for hours worked in excess of 40 in a work week.

kitchen-cookingSome states have implemented a different standard for overtime, ruling that any hours in excess of 8 hours per day is considered overtime. There is also a significant narrowing of the exempt / non-exempt classification. Courts have ruled in favor of shift managers, previously classified as exempt, stating they were mis-classified and were actually line employees working an actual shift and performing shift work. Courts are also clamping down on lunch and break times violations, forcing employers to back pay employees over a period of several years.

To add to the complexity, state and federal laws can differ, leaving the employer unsure of the expected standard.


Occupational Accident Insurance and Lower Workers’ Compensation Premiums

PEOs assist restaurant owners by containing Workers’ Compensation insurance rates by pooling a large number of employees. They have experience in implementing business practices and safety training to reduce the frequency of accidents. The co-employer agreement indemnifies the business if there is a claim. The PEO’s Workers Compensation  policy steps in to cover medical expenses associated with an on the job injury claim, and also pays lost wages during recovery.

Since the PEO has a large pool of employees, the employer is not hit with an increased modifier or premiums at renewal time, keeping costs relatively stable for the employer. Health & retirement benefits are offered at below market rates, as well as complete HR and IRS compliance for all employee and payroll related issues.

Restaurants in Texas can also put an alternate form of Injury Insurance in place, called Occupational Accident Insurance. Premiums are about 30% lower than traditional Work Comp rates for Restaurants and employers are able to set their own limits.


To learn more about how a PEO can help your business, call 832-434-1406 or email