Restaurant payroll software: costs, tip credits and what to check

Quick picks for restaurant payroll

Federal tipped cash wage

$2.13 an hourMax tip credit $5.12 (DOL, July 1, 2026)

States with no tip credit

7AK, CA, MN, MT, NV, OR, WA

15 employees, cheapest with time tracking

$114 a monthRoll by ADP: $39 + $5 each

15 employees on Square Payroll

$125 a month$35 + $6 each, tips from Square POS

• On Square POS already: Square Payroll pulls timecards and tips from the POS. $35 + $6 per person paid.
• Want scheduling and payroll in one app: Homebase (free scheduling for one location up to 10 employees; payroll $49 + $6) or 7shifts (tip pooling and labor compliance, payroll as an add-on, price not published).
• Lowest cost with time tracking included: Roll by ADP at $39 + $5, with tipped wages listed as a feature and a three-month free trial.
• Several locations in different states: Gusto Plus or OnPay, which include multi-state payroll. Homebase runs multi-location payroll only under one EIN.

What restaurant payroll costs for 15 and 30 employees

Restaurant payroll has more line items than office payroll: time tracking, scheduling, tip import and sometimes a POS link. The table adds the add-on a restaurant would actually need to the base price.

Payroll fees are small next to the taxes. Each server's reported tips are wages for Social Security and Medicare, so on $600 of reported tips in a week you owe $600 x 7.65% = $45.90 in employer FICA on top of the cash wage. State unemployment tax runs on top of that. See what payroll services cost per employee for larger teams and the employer cost calculator for taxes by state.

Restaurant payroll providers compared

Payroll services ranked by our published payroll scores, then scheduling apps with payroll by their scheduling scores. Scores come from our scoring method. Payroll services are scored out of 100 on price transparency and cost for 10 employees (25 points), tax filing coverage and guarantee (20), features (20), contract and exit terms (15), support access (10) and documented complaints (10). Scheduling tools are scored on their own criteria, so compare those scores only with each other. Scores do not yet weigh tip features; use the feature table above for those. The ADP score is for ADP RUN, not Roll by ADP.

Tip credit: how much cash wage you must pay in 2026

Under federal law you can pay a tipped employee $2.13 an hour in cash and count up to $5.12 an hour of tips toward the $7.25 minimum wage. The employee must customarily and regularly get more than $30 a month in tips. If tips fall short, you pay the difference (DOL tipped wage table dated July 1, 2026).

Worked example: a 30-hour week in Texas

• Cash wage: 30 x $2.13 = $63.90.
• Minimum the server must end up with: 30 x $7.25 = $217.50.
• Tips needed to cover the gap: $217.50 minus $63.90 = $153.60 (that is the full $5.12 credit x 30 hours).
• If the server reports only $120 in tips that week, you owe a top-up of $153.60 minus $120 = $33.60.

Your payroll software should run that check every pay period. Ask the provider to show you where the tip credit shortfall appears on a pay stub before you sign.

States that change the math

• No tip credit at all: Alaska ($14.00 from July 1, 2026), California ($16.90), Minnesota ($11.41), Montana ($10.85), Nevada ($12.00), Oregon (same as the regional minimum) and Washington ($17.13). Servers get the full minimum wage before tips. See California employer taxes and wage rules.
• Florida: $11.98 from September 30, 2026 ($15.00 minus a fixed $3.02 credit). See Florida payroll taxes.
• New York food service: $11.35 in NYC, Long Island and Westchester; $10.70 elsewhere. Other tipped jobs differ. See New York payroll rules.
• Hawaii: $14.75, and the $1.25 credit applies only if wages plus tips are at least $7.00 above minimum wage.
• Maine and Vermont: half of the minimum wage ($7.55 and $7.21), with tipped employee thresholds of more than $191 and $120 a month.

Every state's 2026 minimum and tipped cash wage:

Many cities set higher rates (Denver's tipped wage is $16.27). The 2026 minimum wage table has the notes for each state.

Tip reporting, FICA on tips and "no tax on tips"

Three tax rules make restaurant payroll different, and each one is a reason to pick software that handles tips natively.

1. Reported tips are wages. Employees report cash tips to you, and you withhold income tax and the employee's 7.65% FICA and pay the employer's 7.65% on them. Card tips come through your POS. If tips do not land in payroll automatically, someone types them in every pay period.
2. Form 8027. A large food or beverage establishment (food or drinks consumed on the premises, tipping customary, and normally more than 10 employees on a typical business day in the prior year) files Form 8027, the Employer's Annual Information Return of Tip Income and Allocated Tips (IRS Instructions for Form 8027, checked October 17, 2026). Ask the provider whether it produces the report data or leaves it to you.
3. The FICA tip credit (Form 8846). Food and beverage employers can choose to claim an income tax credit for part of the employer Social Security and Medicare tax paid on tips, on Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips (IRS FICA tip credit page, checked October 17, 2026). Payroll software does not claim it for you; it goes on your business return. You need clean per-employee tip and wage reports to figure it.

We confirmed the form names and the Form 8027 employee test through IRS search results on October 17, 2026. The tip allocation rules and the credit calculation are in each form's current instructions; read them, or ask your accountant, before you file.

Tip pooling, POS and scheduling: what to check in a demo

Buyers ask whether payroll will "pull tips and hours from my Toast or Square POS". The answer decides how much manual entry you do each week.

One owner on Hacker News said their POS vendor could not produce a report New York required and pushed its own payroll instead. Before you tie payroll to a POS, ask for a sample of every state report you file. For scheduling-first tools, see restaurant scheduling apps compared, Homebase pricing and 7shifts pricing.

Complaints, guarantees and leaving a provider

• Penalties after a filing error are the top payroll complaint. Square covers penalties from its errors (interest not mentioned). Gusto reimburses penalties but needs agency notices 30 days before the response date. Homebase publishes no tax guarantee.
• 7shifts has a 2.2 rating from 250 Trustpilot reviews and 4.5 from 129 G2 reviews (both seen October 16, 2026). The gap between the two is wide enough to read recent reviews first.
• Homebase rates 3.8 from 345 Trustpilot reviews and 4.6 from 614 on G2.
• Exit terms: Gusto bills the full month if you cancel after the 5th, and charges $100 federal, $100 per state and $5 per form if it files your final returns. Homebase says "cancel anytime" but does not say how long you keep W-2 access. 7shifts has a help article on W-2 delivery after cancellation.
• Seasonal restaurants: a switch or a closed season can mean missed quarterly wage reports. One seasonal owner said a new provider "does not file wage reports in my one quarter". File zero-wage reports and keep your SUTA account active; rates for every state are in our 2026 SUTA table.

A PEO can make sense for a restaurant group that wants group health plans and workers' comp under one bill. PEOs price by quote; see PEO providers ranked and what a PEO costs per employee.

Common restaurant payroll mistakes

• Taking a tip credit in a state that bans it. In California or Washington the server's cash wage must be the full minimum wage.
• Not topping up short weeks. A slow week can drop a server below minimum wage after tips; the shortfall is yours to pay.
• Forgetting FICA on cash tips. Unreported cash tips still create employer tax if the IRS finds them later.
• Treating "no tax on tips" as a payroll change. It is an income tax deduction for workers; FICA on tips continues.
• Buying scheduling and payroll from two vendors without an integration. Double entry of hours is where overtime errors start.