Restaurants oftentimes offer their employees either free or discounted meals while they are on shift. Some restaurants even bring the employees together for a family style meal before their shift starts. This can create a positive work environment and motivate employees, but are these staff meals reducing profit margins? Well, not necessarily. Any type of employee compensation is considered as a tax deductible business expense for the employer. This means that restaurant owners can keep their employees satisfied, without eating the costs. So, both employees and restaurant owners reap benefits from staff meals: the employees get free food, and the employer gets to file staff meals as tax deductibles. In order for this to hold true, some requirements must be met:
- The meal has to be provided on the business premise.
- The employees must have the meal immediately before, immediately after, or during their shift.
- The employee must be subject to a restricted meal period. This is true for food service employees as they usually take their breaks when the restaurant is slow, but this can change at any time. Therefore, it is more convenient for restaurant owner’s to have their employees in the restaurant and on call.
Should these meals still be entered into the POS System?
There are a few reasons why it is extremely important that these meals are still entered into the POS System, even though they may not result in revenue!
- Records are necessary for restaurant owners to claim their full amount of deductions.
- Inventory levels will not be accurate if these meals are not accounted for.
- Net Income will be skewed. Since these meals are technically an expense for business owners, these costs will initially reduce Net Income. These losses will then be recovered when they are used as tax deductions.
The best way to enter these meals into the POS system is to add a category for “Employee Meals”. This category can then be setup to automatically deduct the desired discount rate. This makes it easy for employees to quickly check-out and for restaurant owner’s to maintain accurate books. Similar categories can be added for Manager or other specific groups of employees.
To get a better hold on daily sales entries, restaurants can use a daily sales automation system to automatically post journal entries or sales receipts to their accounting software, saving time and adding detail to financial reports.
Employee and manager meals are a big part of employee compensation, so staying on top of them is key to keeping restaurant costs in line.