Expert: Shirley McAllister, CPP, PHR - 11/12/2008

Question
I work for a non profit. In an effort to ease our cash flow, we are contemplating switching from 26 pay periods per year to 24.  Our last pay period in Dec is 12/14/08-12/27/08. The paydate is 12/31/08.  This is not conducive for a pay date of the 1st and the 15th.  We are looking at the 15th and the 30th or thereabouts.  How do I schedule payroll cutoff dates and paydates that are consistently on a certain day of the week?  I want to make this NOT confusing or complicated. We have 30 salaried employees and 5-7 hourly employees.
Thank you,
Rhonda

Answer
Since you are already holding a few days back this will not be complicated for you.

You say your paydate cuts off on the 27th and pays on the 31st. That means if you cut it off on January 10th and pay it on the 15th there will still be two weeks pay.

Dec 29, 30, 31, 3 days
Jan 1, 2,       2 days
Jan 5, 6, 7, 8, 9, 5 days
------------------------------
Total 10 days.

Then you can start with the semi monthly salary . I hate processing semi monthly it costs me more time and trouble than bi weekly. If you must than you must. I have been in payroll 25 years and I have done it both ways.

After this you will never have the same cut off day. It will always cut off on a different day.

Your next cut off would be the 27th or 28th depending on whether you want 3 or 4 days for processing.

Now the hard part. The hourly employees you will have to have an excel spreadsheet or something similar. When payroll cuts off in the middle of the week you have to go back the next payroll and look at the total amount of hours and pay any overtime due for that week.

Overtime is due on each week separately over 40 hours. So if the employee works on Monday 8 hours,  Tuesday 8 hours, Wednesday 9 hours than payroll cuts off and he is paid.

Now the next payroll he works Thursday 9 hours, Friday 9 hours . For this week he must be paid  for all over time over 40. The problem is that three days were worked the week before. so you have to add all the time for the week up. Mon 8+ Tue 8+ Wed 9 + Thur 9+ Friday 9 for a total of 43 hours for the week. Now he has been already paid for Mon-Wed. So on this payperiod you would pay him for Thurs and Friday 16 hours regular time and 3 hours overtime due .

You have to figure this on every week that that is half in one pay period and half in another for every hourly employee for every pay period.  An excel spreadsheet is how I did it, but I really did not like it at all.

Much easier to cut off one week and pay the next for all employees.
They know when the cut off period is , their check is the same every payday and the overtime is easy.

Now for the salaried. You have been paying on a 26 pay schedule. Now you have to take the annual salary and divide it by 24 times. That means if a salaried employee was earning 40,000 divided by 26 times he would have a check for 1538.46. Now it is divided by 24 times so he has a check for 1666.67.

If you begin this in the middle of a year you have to make sure the salaried are paid the right annual salary at the end of the year.

Now you have to explain this to the employees so they will understand it and not think they are being cheated. Remember they have been getting 26 pay checks now they will get only 24.

Shirley