Expert: Shirley McAllister, CPP, PHR - 5/21/2008

Question
I work for and Institution that is switching once a month paychecks to bi monthly paychecks.  We have been getting paid at the end of the month for the work we did that month and the new system is requiring that we are paid on a two week lag.  Can you tell me the most common way to make such a transition without forcing employees to take a 2 week cut in pay?  Thanks!

Answer
There are a couple of ways that this can be done.

Employees can be allowed to use vacation or PTO time for the two weeks.

The company can pay the two weeks and collect it when the employee terminates as he will have two weeks coming that you have held back. Which means when he leaves he does not have two weeks held back because it goes to pay the company back.If this is done make sure the employee signs an authorization form.

The company can pay the two weeks and set up a payment plan so that an equal portion of the amount is taken from each payroll check over the next few months to repay the amount. If this is done it is booked in as  a two week draw or loan and repayed through payroll deduction. Make sure the employee signs an authorization form. If you do this you would figure how many paydays left in the year, divide the amount paid to the employee for the two weeks by the number of payrolls left in the year and that would be the payback deduction. If you had someone that earned 1,000.00 in two weeks and there are 12 payperiods left in 2008 you would divide 1000.00 by 12 and deduct 83.33 each payperiod for the rest of the year. Do not go into another year as the wages need to be paid back in 2008. Also put in the authorization form that if the employee leaves employment they need to repay the amount upon termination.

Some employees may wish to do it in different ways. If they wish to use Vacation or PTO I would let them do so it is easier and cleaner. If they do not or do not have it to use than use one of the other methods, but it should be the same method not a combination of the two. You can use both vacation and one of the methods. Whichever one of the methods the company decides to use must be for everyone that does not use vacation.

Shirley