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Restaurants & Hospitality: Setting Up Direct Deposit (2026)
Direct deposit for a restaurant is set up once per employee with a bank authorization, prenoted, then paid through ACH on the pay schedule the state allows, with tip credit and tip pooling and high turnover settling on the same file. BEG runs restaurant payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
Setup for restaurants
Each employee signs a direct deposit authorization with routing and account numbers, the account is prenoted with a zero-dollar test before the first live deposit, and split deposits are recorded per employee. Federal law does not let an employer make direct deposit mandatory to a bank of the employer's choosing, and most states require a paper or pay card alternative for employees who do not opt in.
A tipped employee is one who customarily and regularly receives more than $30 a month in tips. An employer taking a tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, and overtime for tipped employees must be calculated on the full $7.25 minimum wage, not the cash wage.
Timing and the restaurant pay cycle
The ACH file goes two banking days before payday for the funds to land on the date, which means hours for servers and line cooks close earlier than the payday itself, and tip credit and tip pooling for the period is settled on that file or on a documented later settlement date. Off-cycle runs, final checks and corrections use same-day ACH where the bank supports it.
Beginning with 2025 federal returns, employees and self-employed workers in qualified occupations may deduct qualified tips, defined as voluntary cash or charged tips including shared tips, up to $25,000 per year; the deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers).
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- A tipped employee is one who customarily and regularly receives more than $30 a month in tips. An employer taking a tip credit must pay a direct cash wage of at least $2.13 per hour and may claim a tip credit of up to $5.12 per hour against the $7.25 federal minimum wage, and overtime for tipped employees must be calculated on the full $7.25 minimum wage, not the cash wage. [DOL Fact Sheet #15]
- Beginning with 2025 federal returns, employees and self-employed workers in qualified occupations may deduct qualified tips, defined as voluntary cash or charged tips including shared tips, up to $25,000 per year; the deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). [IRS: What the No Tax on Tips deduction means for you (March 5, 2026)]
Read the full guide to how to set up direct deposit, and the rest of the restaurant payroll library.
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Frequently Asked Questions
Can a restaurant require direct deposit?
Federal Regulation E bars an employer from requiring deposit to a particular bank; the employee chooses the account. Many states add that a no-fee alternative must be offered, so a written opt-in with an alternative is the safe policy.
When does the restaurant pay file have to be released?
Two banking days before payday for standard ACH. Same-day ACH is available for off-cycle runs and corrections at a higher per-item cost. A tipped employee is one who customarily and regularly receives more than $30 a month in tips.
What does managed payroll cost for a restaurant?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Tip credit and tip pooling, high turnover and multiple pay rates are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Restaurants & Hospitality. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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