New York Restaurant Payroll Management: Answers to 8 Frequently Asked Questions

April 14, 2022 / Category: Uncategorized

New York restaurant payroll management can become complicated, especially if you don’t have prior experience handling payroll. There’s a reason why many restaurant owners decide to outsource their payroll to a reputable third-party service provider, such as Premier Payroll Solutions.

We would like to share our knowledge with restaurateurs who want to learn more about how payroll works. So, let’s discuss 8 frequently asked questions regarding New York restaurant payroll management in the information below.

Male restaurateur using a laptop in his restaurant - working on his New York restaurant payroll management.

FAQs About New York Restaurant Payroll Management

Here are our answers to the most frequently asked questions regarding New York restaurant payroll management:


1. How long should I keep payroll records?

In general, it’s a good idea to keep records that document an expense item, a deduction, income, or a credit on your tax return at least until the period of limitations for the return has passed. And since the IRS can review tax returns for the past 6 years during an audit (plus additional years if any significant discrepancies are uncovered), it may be wise to hold on to certain records for at least that long.


2. What are some payroll taxes specific to New York?

New York as a state has specific payroll taxes that you’ll need to pay on a regular basis; New York City has additional fees and surcharges to watch out for. Common payroll taxes include:

  • State income tax. This varies according to an employee’s income and can range from less than 5% of wages to 9% or more.
  • NYC surcharge. Employees who live in the city have an additional percentage deducted from their taxable salary.
  • Yonkers surcharge. Employees who live in Yonkers also have an additional percentage they have to pay in taxes, although it’s considerably less than the NYC surcharge.
  • Property tax. Property taxes vary considerably according to location, but they are generally a killer in New York. While this isn’t technically a payroll tax, it’s something you’ll have to factor into your budget every year.
  • Other taxes. Sales tax and use tax aren’t considered to be payroll taxes either. However, they certainly can affect your payroll decisions. Sales tax in particular has to be filed and paid regularly (either monthly, quarterly, or annually).

3. Are tips considered to be part of payroll?

This is a very common question that restaurant owners have, and the answer can get tricky. 

First of all, it’s important to note that the term “tip” refers to any payment that a customer makes without compulsion (i.e., it’s not on their bill). And yes, tips are generally considered to be taxable income.

The big question is: How are tips handled at your restaurant? For example, are your servers tipped on an individual basis? If so, then you have the responsibility to withhold income and FICA tax on any tips reported to you within a given pay period. However, if you have a tip pool at your restaurant (when all tips from a specific day or night are pooled together and then evenly distributed to your servers on duty), then you’ll have to follow New York’s tip pooling laws. For example, managers and supervisors cannot participate in tip pools.

As you can tell, tipping can be difficult to navigate in terms of payroll. This is yet another reason to consider outsourcing payroll services to an experienced third-party firm.


4. What percentage of my restaurant’s net income should I spend on payroll?

There’s no one right answer to this question. However, many restaurant owners aim to keep their total labor costs between 20-30% of their income. Of course, the size and nature of your restaurant will play a big role in what you end up spending on payroll. For instance, you should expect to spend more on payroll if you have a Michelin Star chef on your staff, as opposed to a high school graduate who specializes in frying burgers.

Female restaurant owner speaking with a female payroll expert about her New York restaurant payroll management.

5. What do I need to report when I hire a new employee, and when?

Any time you hire a new employee (or re-hire a previous employee after a 60-day absence), you must disclose certain pieces of information to them on their first day of work. You must also provide the Department of Taxation and Finance with specific information within 20 days of the hire date. (That’s 20 days from the first time the employee works for wages or tips, not from the time you extend a job offer to them.)

On the employee’s first day of work, you need to provide them with the following information in writing:

  • The pay rate for their position (plus any overtime rate, if that applies)
  • Whether they’ll be paid by the hour, shift, or week
  • Whether you intend to claim a certain amount of their tips as part of the minimum wage
  • When they’ll be paid daily, weekly, or bi-monthly
  • Your company’s name, address, and phone number

Within 20 days of their first day of work, you’ll also need to provide the following info to the Department of Taxation and Finance:

  • The employee’s name, address, Social Security number, and date of hire
  • Your company’s name, address, EIN, and any health insurance benefits your company offers, along with the date that the employee qualifies for those benefits

6. Do I need to offer paid time off (PTO)?

In many situations, PTO is required. For example, as of January 2021, employers in NYC must grant up to 12 weeks of paid family leave if the employee meets certain qualifying conditions. Also, New York State requires employers to have a sick leave policy in place.


7. If I decide to work with an outsourced payroll service, how do I pay my bill?

Generally speaking, your billing will occur on the same day as the check date. In other words, the payroll company will bill you on the same day your employees get paid. You may be able to pay manually via check or EFT (electronic funds transfer), or set up automatic payments.


8. What documentation do I need to submit to start the payroll service?

At the very least, you’ll need:

  • Your EIN (Employer Identification Number)
  • Your SUI (State Unemployment Insurance) Tax ID
  • Filled-out W-4 and I-9 forms for each employee

You may also need to provide a voided payroll check and the wage history for the current year.

If you have any other questions related to New York restaurant payroll management or payroll outsourcing, reach out to our team of friendly, knowledgeable experts at Premier Payroll Solutions today.