Expert: Shirley McAllister, CPP, PHR - 6/23/2008

Question
We are a small IT consulting shop, historically we have paid employees on a bi-weekly basis. This pay schedule is creating havoc on our monthly forecast and cashflow since we have to pay an extra payroll in June.

We have decided to move to a semi-monthly pay schedule starting July 1, 2008. My question is, on our last bi-weekly last payroll at the end of June. We will have one extra day - the 30th of June which will not the part of the pending bi-weekly pay schedule. How should the pay for this extra day been handled? Are we obligated to pay this day under the bi-weekly schedule or we can include the extra day in our semi-monthly schedule in July?   

Thank you for your help

Answer
It doesn't matter which schedule it is paid on as long as it is paid to the employee.

What you do have to watch for is if you have any non exempt hourly employees they must be paid overtime for all work done over 40 in a week. It cannot be averaged over a payperiod. Each week must be looked at separately. So if you change to semi-monthly you have to look at the partial week on the next paytime for all hourly employees and keep track of hours to see if any overtime is earned.

I used to keep a spreadsheet when we were semi monthly, I absolutely hated it and was ever so glad when we went to bi weekly so it could be a clean cut off on Friday and paid out the next friday. I did not mind the extra payrolls in a year at all. It was much easier than keeping track of all the hourly time that overlapped payroll for overtime purposes.

If you have semi monthly payrolls, and 2 weeks and 3 days are worked you have to keep track of the time worked for the hourly on those 3 days and next semi monthly you have to add the remaining two days time to see if overtime is due. If overtime is due than it must be paid on the semi monthly payroll with the two days.

One payroll 108 hours worked  40 one week, 40 next week than 28 hours in the 3 days. Now on the next payroll 18 hours are worked int eh two days remaining in that week. Now you have 28 plus 18 hours in one week. That makes 46 hours in a week so you owe 6 hours overtime for that week.


Shirley

Okay, it wasn't clear enough, let's see if I can make it more clear so you can understand it.

You can pay the day on either paydate as long as it is paid.

You must look at each week indendently for overtime purposes.

If a week falls half in one pay period and half in another pay period you still must look at the whole week Sunday-Friday or whatever your week is for overtime purposes.

Shirley