Expert: Shirley McAllister, CPP, PHR - 11/8/2010

Question
Do you have any suggestions on how best to change our bi-weekly paydate to occur after 2 week pay period has been completed in 2011?  Should we process an involuntarily loan to employee in 2nd pay period week, and then deduct the loan amount when the new payroll schedule date takes place the week after the 2 week pay period is completed? We will go from 26 pay periods in 2010 to 25 pay periods in 2011 in order to pay staff after 2 week pay period has been completed.

Answer
I am not sure I understand but if you are saying that the employee is going to go 3 weeks before they receive a check this is not legal in most states. Most states say in their regulations that the employee must be paid at least semi monthly.

I understand what you are doing, however, it may not be possible depending on which state you are in.

If you are simply changing it so they end on one week and are paid the next week you could cover that one week they will not be paid in a number of ways.

When we did this we allowed our employees to cash in Vacation or PTO time for that week even though they would eventually be paid for the week it eased the transition. It was a small price to pay for keeping our employees happy.

You also could do a loan or a draw from the next pay period, but if it is something they need to pay back I would make sure they approved it so you would need to write up loan agreements for each of them to sign. If it is a draw write up approvals for a draw to be given and taken back from the check once it is paid.

If you only have 25 paydays instead of 26 in 2011 than you need to take the salaried employees based on an annual salary and divide their annual salary by 25 instead of 26 for their salaried amounts or they will not be paid the correct salary come year end.

40,000 salaried divided by 26 pay periods is 1538.48 a pay period
40,000 salaried divided by 25 pay periods is 1,600.00 a pay period.

If you did not want to do it all at once and had a few months to accomplish this I have known some companies that have scaled back one day a month until the desired cut off time is reached. This way it is only one day at a time and not a whole week. But it takes a while to get to where you want to be. You simply cut payroll off one day early each pay period until you have the desired cut off time.

Make sure that all employees know what you are doing, why you are doing it and when it will take place. Give them at least a 30 day notice before changing payperiods and above all read your state regulations to make sure that it is legal to do.

Shirley