Expert: Shirley McAllister, CPP, PHR - 1/27/2011

Question
QUESTION: Currently, our weekly payroll period runs from Thursday thru Wednesday. We'd like to change it to run Monday thru Sunday. However, we are unsure as to how to implement the change with the least impact to both the employees and the company. We are a small mom and pop shop with 10 employees, and most of them live paycheck to paycheck. Our cash flow is low, and we sometimes struggle to meet payroll. Can you help us figure this out? Thanks for any help you can give.

ANSWER: Personally I would be thinking about changing to a bi weekly payroll and cutting the payroll off on Friday and paying out the next Friday. So every other Friday you would have a payroll instead of every week.

If you want to still do a weekly payroll you have to give yourself time to prepare the payroll. So do you know which day you will be paying out paychecks? If you cut off on Sunday this time are you paying paychecks every Wednesday? So the time would be Monday - Sunday and pay cuts off on Sunday and is paid on Wednesday?

That means you have to cut the payroll that usually cuts off on Wednesday off on Sunday. They will have the extra days one time on their check but they will have to wait until Wednesday to be paid instead of on Friday or Saturday whenever you usually pay out payroll.

When I worked in St. Louis for Sonic Drive In doing payroll we paid every Friday. The new employee was held back a week on the first check only which he/she would then be paid when the employee terminated from the company. They were always paid a week behind. so if time were to go in on Sunday than the first week would be held back and they would not get a check until the next week. After that they would get a check every week on whichever day payday was.

You should let the employees know at least 30 days ahead of time so they can prepare especially if they will be held back a week.

Shirley

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

QUESTION: We want to continue with a weekly payroll, with checks being distributed on Fridays. We rarely work on weekends, so essentially we have a five-day work week. Currently, with the cutoff on Wednesday, we have only one day, Thursday, to prepare payroll. The banks need two days to process direct deposits, so the checks are currently dated for the following Monday. Some workers are not on direct deposit, so we do have live checks also.

The goal is to have more time to prepare payroll and to have checks dated for Friday so the workers will have their money to spend over the weekend. Example: work performed 2/7 thru 2/11 would be paid on 2/18.

The problem that we are having is figuring out how to do this with the least amount of pain for both the company and the workers. We have heard that some companies give an advance to cover the "missing" days, with the advance to be paid back over time. We simply don't have the funds for this approach. However, we don't want unhappy workers either. They have ways of retaliating that are very costly to the company. We've seen it happen before. So you can see our dilemma. Is there a way for our company to even make this switch? If so, can you help us figure out how to do it?

Answer
Okay so what we are really trying to accomplish is to make payroll a week away without the waiting week for the employee.

I have a "out of there" brain thought. Now you are cutting payroll off on Wednesday and doing payroll on Friday...not enough time. Okay, what if next time you cut it off on Tuesday, did payroll on Friday. The next week you cut it off on Monday and did payroll on Friday. The 3rd week you cut if off on Friday and do it the next Friday.  Just doing it gradually over 3 pay periods would that work?

You would have to have a meeting and discuss what you are trying to accomplish with the employees. After the 3 weeks were done you could cut it off on Friday and pay the next Friday. So they would then have a full week each time.

If you did it over Memorial Day where there is a Monday Holiday and you are closed for that day than you might be able to do it in two steps.

Shirley