Costly HR payroll mistakes restaurants make

Restaurants in general continue to make costly HR payroll mistakes that leave them exposed to claims by plaintiffs’ lawyers, and increasingly U.S. Immigration and Customs Enforcement (otherwise knows as ICE). These mistakes are easily avoidable by making some easy to implement policies and procedures.

hr payroll classificationFirst of these costly mistakes is the misclassification of employees as exempt, mainly to avoid paying overtime. Cooks, wait staff, and even assistant managers rarely meet the legal requirement required by the IRS to exempt them from overtime laws. Yet, due to the long hours required of these jobs and the temptation to skirt overtime pay an owner will simply misclassify one of these positions as exempt.

We’ve even come across restaurant owners who tell us- My Executive Chef is an artist, and therefore qualifies under the “creative professional exemption”. To this we point out that the Executive Chef must (1) possess a four-year specialized academic degree in a culinary arts program; (2) regularly design unique dishes and menu items (using invention, imagination, originality or talent); (3) be paid on a salary basis of at least $455 per week; and (4) they cannot primarily perform routine mental, manual, or physical work (e.g., routine cooking and food preparation) to qualify. When analyzed closely with this criteria, many Executive Chefs simply fail to meet one or more of the requirements for the exemption.

You cannot simply rely on job titles like “Executive Chef” to determine a classification. To see the full list of exemptions, and the requirements for each- you should visit here and get your information straight from the Department of Labor.

Overtime Pay

Secondly, let’s talk about overtime- always the elephant in the room. Whenever hourly (non-exempt) employees work over 40 hours in a given week, you must pay them time and a half. Sounds simple enough right? What if you are a restaurant in Florida where your tipped employees $5.23 an hour in cash wages, do you pay overtime at $7.85 ($5.23 X 1.5)? This is where many restaurant owners get tripped up.

To properly calculate the overtime for a tipped employee in Florida, you must do the following:

  1. Break out Florida’s combined minimum wage. So, you have $5.23 in cash wages, and $3.02 which is Florida’s maximum tip credit for 2018. Combined, these two add up to Florida’s minim wage of $8.25.
  2. Multiply the time and a half by Florida’s combined minimum wage, so 1.5 X $8.25 = $12.38
  3. Now subtract the tip credit of $3.02 from this overtime calculated rate of $12.38 to get the tipped credit overtime rate of $9.36- and there you have it.

Every hour your tipped Florida employees work in a given week over 40 should be paid at $9.36. Of course, paying your tipped employees more than the $5.23 minimum would impact your tip credit and thus the entire calculation. You’d end up paying your employee more than the $9.36 calculated above.

Lastly, incomplete or incorrect hiring paperwork can come back to bite you in the rear as a restaurant owner. You should have job descriptions, employment applications, a completed and signed W-4 form from the IRS, and a completed and signed I-9 form and verified identification for all of your employees. We also recommend using the government’s E-verify system to verify that your employees can legally work in the U.S.- you can sign your business up to use the system by clicking here.

As always, should you have any questions or need any help in changing your HR payroll policies or procedures to avoid any of these costly mistakes- don’t hesitate to pick up the phone and call our HR team at (305) 273-4066. Thanks!

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Forget the Holiday Party, We’ve Got Human Resources Issues to Discuss!

It’s late November and the expectations placed on a human resources blogger this time of year usually aren’t very high. Social norms dictate that we come up with a list of the “Top Ten Things” we’re thankful for in the office or some sage advice on how to throw a fun holiday party that doesn’t end in litigation or termination. But this year is different. This year the news is a little too big to focus on best practices to prevent HR headaches after the office festivities.

We just elected a new president. Chances are you’re either still celebrating or still in shock. President-Elect Trump made many campaign promises and, while we don’t know yet which ones he will deliver on, several key promises will directly affect employers. Among the safe predictions are a focus on immigration worksite enforcement and sweeping changes and/or a total repeal of the Affordable Care Act. Another prediction is lifting the new payroll threshold for overtime.[1] It’s this last item that has caused many to breath of sigh of relief. But don’t breathe too deeply!

According to SHRM, President-elect Trump can’t do much about the “December 1st effective date of the new overtime rule, which doubles the exempt salary threshold under the Fair Labor Standards Act (FLSA) to $47,476.[2]” Even if it was a top priority of the new administration, changes would take a very long time thanks to the notice-and-comment period required by law.

So for the time being, we all need to be prepared to follow the overtime rule as written. It does appear that Trump is open to the idea of calling for a small-business exemption to the rule after he takes office in January, but by then businesses will have already made a lot of changes to comply with the rule.

It’s also possible that Trump will decide to leave the rule stand as-is. While Trump did say in a brief interview on the campaign trail that he favored a small-business exemption, any changes to the current rule could negatively impact some of his supporters, many of whom could earn more once the rule is in place.[3]

There are many HR regulations that could see sweeping changes under a Trump administration: Minimum Wage, FLSA, Pay Equity, Family Medical Leave and Health Insurance just to name a few. All were things discussed on the campaign trail at one point or another…but will they all be changed? Much like this election, it’s nearly impossible to predict!

Our job will require something much harder than predictions. As HR Professionals, we will need to determine what the changes mean to our own organizations and which will mandate action. If we’ve already reclassified employees based on the overtime rule, will be reclassify them again if the rule is changed? Sure, it would be allowed by law, but would it be the best thing for our organization? What is legal and what is right are not always one in the same.

Don’t think about it too much… or that fourth drink at the office party will seem completely reasonable!

What potential HR changes are you looking forward to under the new administration? We’d love to hear from you. Post your comments below.

 


 

[1] http://www.hreonline.com/HRE/view/story.jhtml?id=534361418

[2] https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/trump-overtime-rule.aspx

[3] http://www.hreonline.com/HRE/view/story.jhtml?id=534361495

popdevteamForget the Holiday Party, We’ve Got Human Resources Issues to Discuss!
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