Expert: Shirley McAllister, CPP, PHR - 3/23/2011

Question
My company has been paying salaried employees bi-weekly with payday 1 week after the payperiod ends.  In computing the new salary at 24 pays doesn't the one week that has not been paid due to the holdback period need to be considered if the new paydate is equal to the last day of the payroll period and the holdback period has been eliminated?  Doesn't the holdback pay need to actually be paid?

Answer
If they are changing pay periods part way through the year they need to recalculate the salary amount.

If you were earning 20,000 a year paid 26 times a year your salary would be
769.23 a pay day

If you were earning 20,000 a year paid 24 times a year your salary would be 833.34 a pay day.

So they have to add up all the payperiods already paid Jan-Mar...subtract that amount from the annual pay and divide that by the remaining pay periods.

Say you earn 20,000 a year and have had 6 paydays already at 26 pay periods a year you would have already been paid 769.23 X 6 = 4615.38

You need to subtract the 4615.38 from 20,000 which is 15,384.62. Now you have to divide the 15,384.62 by the remaining pay periods in the year . 24 is the amount you want minus 6 already paid you have 18 remaining pay periods. 15,384.62 divided by 18 is 854.71.

As to any held back weeks those are paid out to the employee upon termination from the company due to quit, fire or retire.

Shirley