Categorizing Restaurant Payroll: Ordinary Payroll vs. Key Payroll

Many restaurant owners may not realize their options when it comes to categorizing and insuring their payroll system and employees. The two main employee payroll categories are commonly referred to as key payroll and all other. Small businesses and restaurants all need a payroll system fit for their needs. Learn what’s best for your company as we discuss two employee payroll systems, how they differ, and the steps to properly insure your business with H&K Insurance.

Ordinary Employee

Ordinary employee refers to the expense of payroll for all employees working under an insured business. It includes most employees which the company is not dependent on. The company could likely continue to run properly if these employees were to leave until someone is hired as a replacement. Ordinary employees include all of the company, excluding upper level management and employees under contract.

Key Employee

Key Employees are typically those who are in higher level management positions, who tend to have an advanced skill set, making them difficult to replace. A key employee also has much power and influence over the decision making of the company compared to other employees. These employees typically include the restaurant owners, managers, executive chefs and other employee essential for success.

Difference Between Ordinary Employee and Key Employees

There is a fine line when it comes to identifying ordinary employees from key employees. Some of the factors contributing to the difference include:

• Position: Key employees typically hold roles such as executive chef or manager at the upper management level, while ordinary employees are in lower level positions, such as waiting tables.
• Skill Set: Key employees have a high-level skill set specific to the business. This makes key employees much more difficult to replace than ordinary employees, such as knowing the secret to cooking all the menu options.
• Responsibility: Key employees have a significant responsibility compared to ordinary employees, which is trusted due to their advanced skill set.
• Influence: Key employees hold roles, such as director or executive, that have a substantial amount of influence on the decisions made. Typically, ordinary employees do not substantially impact the future of the company.
• Salary: Key employees tend to have a higher monetary value regarding their salary. Since they have more responsibility and influence, they are provided a higher salary than ordinary employees.
• Layoff: If a company suffers a severe loss or event that forces significant budget cuts – or even a shutdown of business – key employees are the last to get laid off. The company will let go the ordinary employees first, and key employees only if necessary.

Business Interruption Insurance & Key Person Insurance

Now that we understand the difference of employee categorizations, let’s take a closer look at how a proper insurance policy on your payroll can protect your restaurant. One primary option you have is to purchase business interruption insurance for your company.  This is a policy that can be added to property insurance coverage and can assist in times of crisis. It can cover the loss of income that occurs while the business is out of service following a disaster. Receiving the income allows you to continue to pay your employees while the business is closed due to a covered loss. Likewise, in the event of an accident or death to one of these key employees, key person life or disability insurance can help compensate a business while they work to replace them.

Classifying and insuring your restaurant’s payroll and employees is essential to ensure proper budgeting and organization. If you are interested in learning more about the difference between ordinary and key payroll, and how business interruption insurance can protect your company, contact our experts at H&K Insurance. Our restaurant insurance specialists are always here to help with any of your needs.