The five payroll and tip compliance mistakes we see most

Tip compliance is one of the most common — and most expensive — audit findings we see in restaurants. The rules changed materially in recent years, and many operators are still running policies that pre-date the current guidance.

The five recurring mistakes: improper inclusion of back-of-house staff in tip pools, failing to meet the 80/20 threshold for tipped work, incorrect overtime calculations on the regular rate for tipped employees, missing tip credit notices, and inconsistent recordkeeping between the POS and payroll.

Any one of these can trigger a wage-and-hour claim. Together they can turn into six-figure liabilities in a state audit.

The fix is usually procedural: written tip policies, monthly reconciliation between POS tips and payroll, and a quarterly review of tipped overtime calculations.