How to Run Payroll for Seasonal Employees: A Restaurant Owner’s Guide

Busy season is coming, and you’re about to add a wave of new faces to your team. Learning to run payroll for seasonal employees for the first time can feel like a lot. The good news is it’s mostly the same payroll you already run, with a few extra rules to watch.

This guide walks you through classification, taxes, wages, and the exact steps to pay your seasonal crew correctly.

What running payroll for seasonal employees really means

Running payroll for seasonal employees means paying short-term staff the same way you pay regular employees. You track their hours, withhold taxes, and pay them on a set schedule. The extra care comes from three areas: classification, overtime, and benefits.

A seasonal employee is someone you hire for a short, predictable window of high demand. Think patio season, the summer tourist rush, or the December holidays. They’re on your team for weeks or months, not year-round.

Seasonal hiring is a huge part of the economy. Bureau of Labor Statistics seasonal hiring data shows employment in retail trade industries that hire seasonal workers increased by 494,000 from October to December 2023, a stronger holiday buildup than in 2022. Restaurants ride the same waves.

How the Internal Revenue Service (IRS) defines a seasonal employee

The Internal Revenue Service (IRS) doesn’t lean on one tidy definition. Mostly, it comes down to the nature of the work: labor performed on a seasonal basis, like a summer patio or a holiday rush.

The clearest written rule shows up in health coverage law. Under the IRS seasonal worker exception, you aren’t treated as having more than 50 full-time employees in one specific case.

That exception applies only when two things are true. Your workforce tops 50 full-time employees (including full-time equivalents) for 120 days or fewer during the calendar year. And the employees above 50 during that period are seasonal workers.

So how long can someone be seasonal? There’s no single federal cap. The 120-day mark is a useful benchmark, and the work should tie to a season, not stretch into a year-round job.

Do seasonal employees have taxes withheld?

Yes, they do. This is the biggest myth about seasonal work, and getting it wrong gets expensive.

According to IRS seasonal employee tax rules, part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees. So you’ll withhold federal income tax and Federal Insurance Contributions Act (FICA) taxes from every seasonal paycheck, just like you do for your full-time crew.

There is one small perk. If you only run payroll during your busy season, you can check the seasonal employer box on Form 941. Then you skip filing for quarters with no wages to report.

Seasonal employee vs. independent contractor: get classification right

The costliest mistake is calling a seasonal hire a contractor when they’re really an employee. Get this wrong and the bill lands on you.

An independent contractor runs their own business and controls how the work gets done. An employee works under your direction: your schedule, your rules, your equipment. Your seasonal servers, cooks, and hosts are almost always employees.

Some operators label seasonal hires as 1099 contractors to dodge payroll taxes. That’s not a legal shortcut, and it backfires. Per the IRS worker classification rules, if you classify an employee as an independent contractor with no reasonable basis, you can be held liable for employment taxes for that worker.

The payroll taxes you’ll withhold and pay

When you run payroll for seasonal employees, payroll taxes fall into two buckets. You withhold some from your employee’s paycheck, and you pay some yourself as the employer.

FICA covers Social Security and Medicare, and both you and your employee pay into it.

According to the IRS Employer’s Tax Guide, for 2026, Social Security tax is 6.2% each for the employer and employee on wages up to $184,500. Medicare adds 1.45% each with no wage cap.

Federal Unemployment Tax Act (FUTA) tax is 6.0% on the first $7,000 per employee. With the maximum 5.4% state credit, it drops to an effective 0.6%.

Here’s the split at a glance:

Tax	Withheld from the employee	Paid by you (employer)
Federal income tax	Yes, based on their Form W-4	No
Social Security (6.2%)	Yes	Yes, a matching 6.2%
Medicare (1.45%)	Yes	Yes, a matching 1.45%
FUTA	No	Yes
State unemployment (SUTA)	No	Usually yes
State or local income tax	Often yes	No

Minimum wage, overtime, and tipped pay for seasonal staff

Your seasonal staff earn the same wage floors as everyone else. Under the Department of Labor’s federal wage and overtime rules, covered nonexempt workers earn a minimum wage of at least $7.25 per hour. That federal floor has been in effect since July 24, 2009.

Many states and cities set higher minimums, and the higher rate always wins.

Overtime works the same way. Covered nonexempt workers earn at least 1.5 times their regular rate after 40 hours in a workweek, with no seasonal exemption. If your summer server logs 45 hours, those five extra hours earn time-and-a-half.

Tipped pay has its own wrinkle. You may be able to apply a tip credit toward the minimum wage. The rules vary by state, and some states don’t allow it at all.

One thing never changes: the tips belong to your employees, not the house.

Busy season is when overtime creeps up fast. Our guide to reduce restaurant overtime shows proven methods to catch it before it hits your labor budget.

Do seasonal employees get benefits?

Short-term seasonal staff generally aren’t owed benefits like health insurance or paid time off. The main nuance is the Affordable Care Act (ACA) employer mandate, which can require larger employers to offer coverage.

The seasonal worker exception we covered earlier affects one thing only: whether you count as an applicable large employer (ALE). It doesn’t change your duty to withhold taxes or pay proper wages.

Benefits can still be a smart move even when they’re optional. A shift meal, a reliable schedule, or an end-of-season bonus goes a long way toward getting your best seasonal hires to come back next year.

Step-by-step: how to run payroll for seasonal employees

Here’s the process from start to finish. For a deeper walkthrough of the whole system, see our restaurant payroll guide.

1. Collect onboarding forms. Have each hire complete a Form W-4 and direct deposit setup before their first shift. Get Form I-9 Section 1 done by their first day, with Section 2 completed within three business days.
2. Classify each worker correctly. Confirm they’re an employee, not a contractor, and note their role and pay rate.
3. Set a pay schedule. Pick weekly, biweekly, or semimonthly, and use the same schedule you run for your regular team.
4. Track hours accurately. Use a time clock and a clear clock-in and clock-out policy so punches match real shifts.
5. Calculate gross pay, tips, and overtime. Add regular hours, tips, and any time-and-a-half over 40 hours in the week.
6. Withhold and pay taxes. Take out income tax and FICA, then send those plus your employer share to the right agencies.
7. Pay by direct deposit. Deposit net pay on payday so new staff get paid on time.
8. Keep your records. Hold onto payroll and time records for at least four years, which is the IRS recordkeeping rules standard for employment taxes.

Keep seasonal labor costs and hours under control

Adding a wave of seasonal staff can blow up your labor budget fast. Our guide to control labor costs recommends keeping labor cost between 25% and 35% of sales. Holding that line gets harder when you run payroll for seasonal employees on top of your core team.

Start with a plan. Forecast your headcount before you post the job, using past sales to guide your hiring for busy season. Then build schedules around your busiest shifts, and our holiday work schedules guide helps you staff the peak without overspending.

The real win comes from connecting the dots. When your scheduling, time clock, and payroll talk to each other, seasonal pay stays accurate even as your headcount doubles. Overtime alerts flag anyone nearing 40 hours across all your locations, so you can adjust before time-and-a-half kicks in.

Should you run seasonal payroll yourself, use software, or outsource it?

You’ve got three main ways to run payroll for seasonal employees:

• Do it by hand: You control every step, but manual math invites errors and eats hours you don’t have during a rush.
• Use payroll software: A tool automates the tax math and filings, which cuts errors when you add a wave of new staff.
• Outsource to a provider: A full-service company runs payroll for you, which frees your time for a higher fee.

Not sure which fits? Our guide on when to outsource restaurant payroll walks through the trade-offs.

For restaurants, software built for the industry has an edge. When it connects scheduling, the time clock, and payroll in one place, real shift data flows straight to each paycheck.

That’s how you keep tips and overtime accurate during a hiring surge. 7shifts is built for restaurants, by restaurant people, so it fits how your team actually works.

Running payroll for seasonal employees doesn’t have to eat your busy season. Start a free trial and connect your scheduling, time tracking, and payroll before your next rush.

This guide is general information, not legal or tax advice. Rules change and vary by location, so confirm the details with your state labor agency or a payroll professional.

Frequently asked questions

How does pay work for seasonal jobs?

Seasonal jobs pay the same way regular jobs do. You track hours, withhold taxes, and pay on a set schedule, with overtime after 40 hours in a week.

How does the IRS define a seasonal employee?

The IRS mainly looks at the nature of the work. It treats a seasonal employee as someone hired for labor performed on a seasonal basis rather than year-round.

How long can an employee be considered seasonal?

There’s no single federal time limit, but the 120-day mark from ACA rules is a common benchmark for seasonal work.

Do you have to pay taxes on a seasonal job?

Yes. Seasonal employees follow the same tax withholding rules as everyone else, so income tax and FICA come out of their pay.