Expert: Shirley McAllister, CPP, PHR - 12/8/2009

Question
QUESTION:  We are converting 16 full time employees from salaried to hourly non exempt.  

All of our 100 employees are paid on a semi monthly basis and I also have 14 part time employees. We are implementing a new timekeeping system along with this change in January. By doing this these employees will be short at least 4 days of pay the first pay period. We are considering changing all of them to a biweekly pay period. Either way they will have a short pay period.



What is the proper way to handle this? How can this be accomplished with as little “pain” as possible to payroll as well as the employees? We are at a loss on where to begin.





ANSWER: We actually did this several years ago. It is a much cleaner easier way to do payroll. We cut all time off on Friday and paid on the following Friday.

We did allow the employees that had PTO or vacation pay as some still call it if they had some accrued.

We allowed those that needed it to take a draw on their next check but that was not a good fix because than the next check was short.

We in a few cases where the employees were in great financial hardship allowed them to take out a short term loan against their pay, sign a promissory note and pay it back a little each payday. This was only done for specific cases of extreme need such as a single mom with no other support, a single student living paycheck to paycheck etc. I think out of 165 we did this for 5 employees.

What we did is let them know at least 30 days ahead of time so they could save a little to cover those few days they would be short. Than we allowed PTO to be used for those short days if they had it accrued and last of all we told them if they needed to talk to HR about it to make an appointment with HR and we reviewed those on a case by case basis.

We were fortunate, as our semi-monthly pay period ended such that they would only lose 3 days of pay.

Shirley

---------- FOLLOW-UP ----------

QUESTION: Thank you for the ideas. Did you make this change on Jan 1 or mid year?
It's late in the year now to prepare everyone for Jan 1. We may need to wait until Mar 1.

ANSWER: I would suggest you change them from salaried exempt to hourly on January 1st you can still pay them semi monthly. If you do not than you will have a harder time figuring out their hourly amounts. Salaried exempt are paid on an annual amount per year divided by the number of pay periods paid.

That way it is one change at a time also.

Shirley

---------- FOLLOW-UP ----------

QUESTION: Thanks. I would prefer to pay them semi monthly for now. If we set the cutoff as the 11th and the 25th is it proper to estimate the remaining days thru the 15th and 31st of the month?
And then make the adjustments on the next pay period? I don't expect many adjustments. These employees will be working 37.5 hrs per week. We don't have an overtime situation at our company. The only thing that concerns me is paying them ahead by 4 days or so. Then we could make the change to biweekly mid year with enough notice given to everyone.

Answer
If you pay them ahead and the hours are a little different you can always adjust the next check to take care of the difference up or down.

The only risk you would be taking is if someone terminated you would not be allowed to take any of the time already paid back on the final check so if you paid ahead on the check and the person left you would not be able to recoup those funds.

Other than that I think your plan works just fine.

Shirley