Expert: Shirley McAllister, CPP, PHR - 5/11/2009

Question
This question is related to one you answered in early May.  We are also switching from semi-monthly to bi-weekly.  For our salaried employees, we were planning to calculate how much they have already received and subtract that from their annual salary; then include that amount in the first, short payroll.  However, that means that on December 25th, they will have been paid their full salary even though they haven't worked the last week in Dec yet.  Some say we should only pay for the days worked.  The last week in December would then show up on the Jan.8 payroll.  I think that means the W-2 would be off.  Are there any regulations/compliance issues/laws on how to address this?

Answer
The proper way to do this is to figure out how much they have earned so far this year. Subtract it from the total annual salary. Then divide the amount left by the pay periods remaining so that they are paid the total amount but an equal amount on each of the remaining pay periods.

For example the employee earns 50,000 a year. They have earned 2083.33.  Jan-May there would be 10 payperiods semi monthly.
2083 X 10 is 20,830.00. You subtract 50,000 - 20,830.00 for a remainder of 29,170.00. Now at bi weekly you have 16 pay periods remaining if you pay one on May 30th. So you would divide 29,170.00 by 16 for a wage of 1823.12. So for the remainder of the year the employee would recieve 1823.12 each two week pay period. If you have 15 you would divide it by 15.

This way it comes out even at the end of the year.

Shirley