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Restaurants & Hospitality: State Payroll Compliance Issues (2026)
State payroll compliance for restaurants layers each state's wage floor, overtime rule, pay frequency law, new hire deadline and final pay rule on the federal rules cited on this page, and restaurants carry industry-specific state duties on top. 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.
Where state law touches 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.
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.
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 state layer every employer carries
Each state where an employee of a restaurant works can set its own minimum wage, its own overtime trigger, a pay-frequency law, a new hire reporting deadline shorter than the federal 20 days, a final paycheck deadline, and a continuation coverage rule below the federal COBRA threshold. The state pages on this site carry those facts state by state from one data file, so the numbers here and on the multi-state checker never disagree.
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]
- 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]
- 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]
Read the full guide to payroll rules by state, and the rest of the restaurant payroll library.
Managed Payroll, Handled.
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Frequently Asked Questions
Which state rules hit restaurants hardest?
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.
Does a restaurant need a separate state account for every state with an employee?
Yes, in most cases two: a withholding account, unless the state has no wage tax, and an unemployment insurance account. Under the localization of work rules, unemployment tax for a remote employee goes to the state where the work is performed.
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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