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Restaurants & Hospitality: Payroll Setup Guide (2026)
Setting up restaurant payroll means the standard registrations, an EIN, state withholding and unemployment accounts, new hire reporting, plus the restaurant specifics: pay codes for tip credit and tip pooling and high turnover and a documented classification for servers and line cooks. 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.
Step 1: accounts and registrations
Every restaurant starts with an EIN, a withholding account in each state where someone works (unless that state has no wage tax), an unemployment insurance account in each of those states, and access to each state's new hire directory. New employers deposit federal employment taxes monthly during the first calendar year because there is no lookback period yet.
Step 2: classify servers and line cooks before the first check
Managers and supervisors, defined as employees whose primary duty is managing, who direct the work of at least two full-time employees and who have hiring or firing authority, may not keep any portion of employees' tips or take from a tip pool; they may keep only tips received directly from customers they alone served.
Step 3: build the restaurant pay codes
Tip credit and tip pooling, high turnover, multiple pay rates and split shift premiums each become a pay code with its own taxability and overtime treatment. Building them before the first run is cheaper than correcting a quarter of 941s afterward.
An employer that normally employed more than 10 employees on a typical business day in the preceding calendar year at a food or beverage operation where tipping is customary must file Form 8027 for each such establishment. If total reported tips for a payroll period are less than 8 percent of gross receipts, the shortfall must be allocated among directly tipped employees and shown in box 8 of Form W-2.
Step 4: set the records up to be kept
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.
An employer taking a tip credit must keep records of each employee whose wage includes tips, the weekly or monthly tip amounts reported by the employee, the amount claimed as tip credit, and hours and straight-time pay in both tipped and non-tipped occupations.
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.
- Managers and supervisors, defined as employees whose primary duty is managing, who direct the work of at least two full-time employees and who have hiring or firing authority, may not keep any portion of employees' tips or take from a tip pool; they may keep only tips received directly from customers they alone served. [DOL Fact Sheet #15]
- An employer that normally employed more than 10 employees on a typical business day in the preceding calendar year at a food or beverage operation where tipping is customary must file Form 8027 for each such establishment. If total reported tips for a payroll period are less than 8 percent of gross receipts, the shortfall must be allocated among directly tipped employees and shown in box 8 of Form W-2. [IRS Instructions for Form 8027 (2025)]
- 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)]
- An employer taking a tip credit must keep records of each employee whose wage includes tips, the weekly or monthly tip amounts reported by the employee, the amount claimed as tip credit, and hours and straight-time pay in both tipped and non-tipped occupations. [DOL Fact Sheet #15]
Read the full guide to how to set up payroll for a new business, and the rest of the restaurant payroll library.
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Frequently Asked Questions
What registrations does a new restaurant need before running payroll?
An EIN, a state withholding account and a state unemployment account in every state with an employee, and new hire reporting access. State registrations are the slow step and can take weeks, so they start before the first hire date.
How are servers and line cooks classified at setup?
Managers and supervisors, defined as employees whose primary duty is managing, who direct the work of at least two full-time employees and who have hiring or firing authority, may not keep any portion of employees' tips or take from a tip pool; they may keep only tips received directly from customers they alone served.
What records must a restaurant keep from day one?
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.
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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