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How to account for employee meals

Question:

I offer my employees a family meal with each shift. They can order what they like from the menu up to a certain dollar amount. How do I account for that?

– Jimmy Carbone, Owner-Operator, Jimmy’s No. 43, New York, NY

Answer:

There are many great reasons to provide free or heavily discounted meals to staff.  Among them:

  • Servers who have tasted menu items can sell them more convincingly.
  • People work better and cleaner when they aren’t hungry.
  • Safe-to-eat leftovers or excess product can be repurposed for staff meals.
  • Employees will be happier and have a chance to bond over a meal.

Deborah Schwartz, a tax accountant with James Banks Inc. in Beverly Hills, California, advises, “If the meal is served on premises during work hours or before or after a shift where the employees are working through meal times, the cost of the food would be 100 percent tax deductible.”

From a bookkeeping standpoint, if employees order from the menu, a separate “employee meal” category should be set up in the point-of-sale system so that the order isn’t counted as revenue and the food cost of the item can be expensed as an employee benefit.  In a group family meal situation where, for example, lasagna, salad and garlic bread are served to 40 employees at once, the chef or manager should calculate the food cost of the entire meal so that the figure is counted as a benefit rather than as part of the cost of goods sold.

Proper accounting for family meals in this way will also help to keep the food cost percentage under control, especially important for management’s end-of-year bonus.

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