How to Run a Bar: Payroll Set Up - dummies

By Ray Foley, Heather Dismore

In a bar, as everywhere else, you will lose good people if you don’t pay them on time, every time. Setting up a payroll system helps keep you happy — you don’t have to hire new employees — and your staff happy — they get paid, which is why they’re working in your bar in the first place. The first rule of payroll is to open two separate bank accounts:

  • Operating account: Your operating account is your main account. Money from things like credit card transactions and cash deposits go into this account. You pay all of your bills and invoices from this account.

  • Payroll account: This bank account is only for payroll purposes. Period. End of story. You move money from your operating account to your payroll account by payday. Never move money from your payroll account to your operating account.

    As far as you’re concerned, the money in your payroll account is no longer your money. If, after payday, an employee chooses to hold his check rather than cash it immediately, so be it. Resist the urge to borrow from this account, even temporarily, no matter how tight money may seem.

How to determine payroll period in your bar

There’s really no right or wrong way to pay your people, unless you’re inconsistent. Remember, this bar is not only your baby; it’s your employees’ livelihood. It’s how they support their families, make car payments, and pay for school. Set up a system and stick to it.

Most bars pay weekly or every other week. (Some choose twice a month, usually the 1st and 15th, but this schedule can make calculating pay for hourly employees really tough.) Here’s the rundown on the advantages and disadvantages to you, the bar owner, for both periods.

  • Weekly: The upside is that you have a steadier payout of payroll expenses. Each week you transfer roughly the same amount of money to your payroll account. On the downside, you double your management time. Under this system, you have to verify hours, pay rates, and so on, four or five times a month, rather than two or three times.

  • Every other week: The upside is that you spend less time managing payroll. You can probably cut your payroll costs in half (assuming you’re farming it out) because you need the service less often. The downside is that you have a much larger payroll expense every other week.

How to decide: payroll yourself or outsource it

Depending on the size of your operation, you may opt to do all the payroll duties yourself from start to finish (or assign it to someone in your operation), or you can outsource some of the work to a payroll company.

Here are the basic steps involved in completing the payroll process:

  1. Calculate and verify the hours each of your employees worked.

    No matter what kind of system you use, you or one of your other man-agers needs to look at this information and confirm it before paychecks are issued. If you use a computerized system to track hours worked, you can print a report that gives you the recorded hours worked. If not, collect those timecards and start adding.

  2. Confirm employee pay rates.

    Data entry errors are common, so again someone needs to double-check this important piece of info even if (or especially if) your time clock is computerized.

    After you do this a few times, it becomes second nature. If you notice that your favorite dishwasher worked 32 hours this week at a rate of $132 an hour, you won’t have trouble figuring out that something is amiss.

    Starting at this point, a payroll company can take over for you (except for Step 7, probably) or you can continue the process on your own. This process does become a bit more tedious at this point because you have lots of calculations to make.

  3. Crunch the numbers.

    You have to calculate gross pay and deduct taxes and FICA (better known as Social Security) for each employee to arrive at the net pay (the amount owed the employee after all the withholding is withheld).

    Employee checks are issued for the net pay amount, but the check stub should give them details such as their gross pay and itemized deductions.

    As an employer, you send payment for taxes and FICA to the appropriate government agency on a regular basis. Get with your accountant for the details.

  4. Tally the net pay for all of your employees to determine your total deposit for the payroll account.

  5. Transfer the payroll deposit from the operations account to the payroll account.

    Keep both accounts at the same bank so you can make a phone call or complete an online transaction to move money from one account to another and post it by the end of the day.

  6. Cut checks for each employee.

    Print a separate check for each employee. Make sure each check includes details about the number of hours the employee worked, his gross pay, and any deductions taken out.

  7. Distribute checks to employees on payday.

    Establish a scheduled time, usually midafternoon, to distribute checks.

Even if you hire a payroll company, you still need someone in-house to double-check the information before checks are handed out. Decide whether a payroll company’s service (to basically crunch numbers and issue checks) is worth the amount of money you’ll pay for it.