Expert: Shirley McAllister, CPP, PHR - 3/25/2009

Question
The company I work for used to pay bi-weekly (26 pay periods). They decided that starting in the new year, they would change their pay frequency to semi-monthly (24 periods). It's worth noting that all of the employees are on salary.

So, the last (and 26th) pay period of last year fell on the 26th of December.

Now, the first payroll of the year fell on January 15, the amount being for (clearly) salary/24. The last will be December 30th.

The problem is, there seems to be some dispute on whether or not the last 3 work days in December of last year are owed to us, or if it all works out in the end since we're on salary. I haven't been able to get a clear answer or explanation out of anyone. So please let me know, are we owed for those last few days in December? And if not, can you please provide a clear explanation as to why, because I can't seem to be able to explain it.

Answer
The first thing that needs to be understood is that salaried workers do not work by the hour nor by the day. They are paid a salary to get a job done regardless of the hours and days.

How you calculate a salaried employees wage is thus:

The annual pay amount divided by the number of pay periods in the year.

For example if an employee earns a salary of 70,000 a year.

Under the bi weekly pay period he would earn 70,000 divided by 26 or 2692.30 a pay period. If this employee has been paid 26 equal payments of 2692.30 than he has been paid his 70,000 for the year and no more is due for the year regardless of how many days are left in the year.

Now under the new plan he will be still paid the 70,000 a year only it will be 70,000 divided by 24 pay periods or 2916.66. When the employees have been paid 24 payments of 2916.66 a year they have been paid their annual salary and no more is due for the year.

On the final payroll check stub of the year the gross salary should be the 70,000.

Now if the employees are hourly they are paid for the 3 days.

Shirley