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Restaurants & Hospitality: Payroll Compliance Guide (2026)
Payroll compliance for restaurants rests on the federal rules that reach this industry specifically, 4 of which are cited on this page, plus the deposit and filing duties every employer carries. 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.
The rules that reach restaurants specifically
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.
An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders. An employer that pays a full cash wage of at least $7.25 may include cooks and dishwashers in a mandatory pool, but managers and supervisors may not receive tips from any pool.
The 2021 dual jobs rule that limited tip credits when non-tipped support work exceeded 20 percent of the workweek or 30 continuous minutes was vacated by the Fifth Circuit on October 29, 2024. The Department of Labor removed that text from 29 CFR 531.56 and restored the original 1967 dual jobs regulation effective December 17, 2024.
Restaurants and fast food businesses with annual gross sales of at least $500,000 across one or more establishments are covered by the FLSA, and employees who handle goods moving in interstate commerce, such as a server processing a credit card transaction, are individually covered.
The duties every employer carries
Federal income tax withholding, Social Security and Medicare, FUTA, deposits on the monthly or semiweekly schedule the lookback period sets, quarterly Form 941, annual W-2s and, for restaurants paying contractors, 1099-NEC at the $2,000 threshold in force for tax years after 2025. A late deposit starts at a 2 percent failure-to-deposit penalty and climbs to 15 percent.
Form 8027 for calendar year 2025 is due March 2, 2026 on paper or March 31, 2026 if filed electronically, and records supporting the return and any tip allocations must be kept for 3 years after the due date.
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]
- An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders. An employer that pays a full cash wage of at least $7.25 may include cooks and dishwashers in a mandatory pool, but managers and supervisors may not receive tips from any pool. [DOL Fact Sheet #15]
- The 2021 dual jobs rule that limited tip credits when non-tipped support work exceeded 20 percent of the workweek or 30 continuous minutes was vacated by the Fifth Circuit on October 29, 2024. The Department of Labor removed that text from 29 CFR 531.56 and restored the original 1967 dual jobs regulation effective December 17, 2024. [89 FR 101884 (December 17, 2024)]
- Restaurants and fast food businesses with annual gross sales of at least $500,000 across one or more establishments are covered by the FLSA, and employees who handle goods moving in interstate commerce, such as a server processing a credit card transaction, are individually covered. [DOL Fact Sheet #2]
- Form 8027 for calendar year 2025 is due March 2, 2026 on paper or March 31, 2026 if filed electronically, and records supporting the return and any tip allocations must be kept for 3 years after the due date. [IRS Instructions for Form 8027 (2025)]
Read the full guide to the payroll compliance library, and the rest of the restaurant payroll library.
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Frequently Asked Questions
Restaurant compliance: DOL Fact Sheet #15
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.
Restaurant compliance: DOL Fact Sheet #15
An employer that takes a tip credit may require a tip pool only among employees who customarily and regularly receive tips, such as servers, bussers and service bartenders. An employer that pays a full cash wage of at least $7.25 may include cooks and dishwashers in a mandatory pool, but managers and supervisors may not receive tips from any pool.
Restaurant compliance: 89 FR 101884 (December 17, 2024)
The 2021 dual jobs rule that limited tip credits when non-tipped support work exceeded 20 percent of the workweek or 30 continuous minutes was vacated by the Fifth Circuit on October 29, 2024. The Department of Labor removed that text from 29 CFR 531.56 and restored the original 1967 dual jobs regulation effective December 17, 2024.
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: U.S. Department of Labor: Wage and Hour Division
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