Expert: Shirley McAllister, CPP, PHR - 2/17/2010

Question
We are bringing in employees due to a merger who were paid semi-monthly and will be going to bi-weekly.  My question is how would you reconcile the payrolls during "parallel" to make sure what an employee is now getting in the bi-weekly equates to what they got in a semi-monthly.  I know the total gross is figured out by annual salary/26 for bi-weekly and /24 for semi-monthly, but how would you reconcile gross to net? Total taxes are a percentage of total gross but is there a formula to use to say the taxes taken for a bi-weekly would equal X if they were on a semi-monthly.  Payroll needs to be able to "parallel" somehow and not sure the best way to go about it.

Any insight would be great.  Thanks!

Answer
If the company is a new company for the employee than Fica starts over, if it is not a new company than you have to figure fica to the limit and stop withholding. The difference would be if he will be recieving 2 different W-2's from two companies or 1 W-2 from one company.

The other taxes are okay they will be deducted according to the W-4 form filled out and these have no bearing on the semi-monthly or bi-weekly as they are all done on the W-4 form and on the amount paid. If figuring it manually just use the correct charts in circular E for bi-weekly rather than semi-monthly.

If the employee is working for the same company and you wish to make sure the annual salary is correct than you have some work to do. You have to take the semi monthly salary and add it up for the amount paid already in the year. Say they are paid 40,000 a year. Now we have had 4 semi-monthly pay periods. So they have been paid 40,000 divided by 24 X 4. or 1666.67 X 4 =6,666.68. So you need to take the 40,000 less the 6666.68 for a total of 33,333.32 remaining to be paid in the year. Now you will divide the 33,333.32 by the remaining pay periods which leaves 22 payperiods for bi-weekly. The 33,333.32 is divided by 22 for a total of 1515.15 each pay period.

This can be checked by taking 1666.67 x 4 pay periods =  6,666.68
                             1515.15 X 22 pay periods= 33,333.30
                                                        ------------
                              Total annual wage          39,999.98 or 40,000.00

2 cents difference in rounding is irrelavent if you want it exact you can add 2 cents to the final check.

Shirley