If you’re running a restaurant or quick-serve franchise business, you know that the food industry can be both rewarding and challenging. Not only do you need to keep your customers happy with delicious meals, but you also have to manage a team and stay on top of payroll and HR responsibilities. 


And it’s no secret that handling these tasks can be overwhelming, especially if you’re not familiar with the legalities and regulations involved. That’s why many restaurant owners turn to PEO companies like Vested HR for help.  


Here, we break down what you need to know about the laws and regulations that you should be aware of. Let’s get started!  

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Behind the Scenes of Restaurant Compliance: What You Need to Know 


One of the biggest challenges in maintaining compliance for restaurant owners or managers is keeping up with the ever-changing landscape of laws and regulations for food businesses.  


There are countless rules that need to be followed when it comes to: 



But that’s what we’re here to help with! 


Here’s an overview of what you need to know:  

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Wage & Hour Laws  


The Fair Labor Standards Act (FLSA) is a federal law that sets standards for wages and overtime pay in the United States. The FLSA also includes provisions for tipped workers.  


In addition to the FLSA, many state and local laws and regulations impact how tipped employees must be paid, how tips must be accounted for, and how tip pooling can be handled. For example, some states require employers to pay their tipped team members a higher minimum cash wage than what is required under federal law.  


Other states have specific laws regarding tip pooling or tip sharing among employees. 




Food service workers are often required to work overtime. However, there are federal regulations in place that dictate how much overtime a team member can work and what they must be paid for those extra hours. These regulations also fall under the FLSA.  


The FLSA sets a standard workweek of 40 hours, after which employees are entitled to receive time-and-a-half pay for every additional hour worked.  


As a result, if a food service employee is expected to work more than 40 hours in a given week, their employer is required by law to pay them at least 1.5 times their regular hourly rate for each additional hour worked.  


Note: This can vary depending on your state. Reach out to our team if you are unsure of your state’s regulations. We’re here to help you stay compliant!  

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Payroll Tax Laws  


The IRS requires tipped employees to report all of their tips, including cash tips, to their employer at the end of each shift or month. Further, when tips are shared among team members via a tip pooling system, there are additional requirements that must be met.  


Managers are responsible for ensuring that all tipped employees receive their fair share of the pooled tips. They must also ensure that the total amount collected through the pool is accurately reported and distributed among team members who participated in it. 


To stay compliant with IRS regulations, supervisors should implement clear policies on tip reporting and educate their staff about these requirements. 


FICA Tip Tax Credit 


The FICA Tip Tax Credit is designed to help offset the employer’s share of Social Security and Medicare taxes paid on tips. To qualify for this credit, managers must complete IRS Form 8846, which calculates the amount of the credit based on tips reported by staff. It’s important to note that this credit is only available if your restaurant employs tipped workers. 


In addition to completing Form 8846, restaurants with tipped employees are also required to submit IRS Form 8027. This form reports the total amount of tips received by all team members during the year and ensures that all tips are properly allocated among the team per regulations.  


This helps prevent underreporting or failing to report tip income, which can result in penalties and fines. 


Read More > How PEOs Help Restaurants Thrive  

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Serving Up Compliance  


Restaurant owners must stay up-to-date and compliant with the various laws and regulations that apply to their business. Failure to do so can result in severe consequences such as legal issues, hefty fines, and damage to reputation.  


Partnering with a trusted HR provider like Vested HR can help ensure that you stay compliant with these laws and regulations, while also freeing up more time for you to focus on what you do best— managing your restaurant! 


We’re in(Vested) in your success. Let us help you take the first step toward a more successful future for your restaurant. Contact us nationwide at (844) 928-0925 or (727) 474-2114 today!