Expert: Shirley McAllister, CPP, PHR - 9/1/2011

Question
Our company pays non exempt employees on a bi weekly payroll and our exempt employees on a semi monthly payroll. Starting Jan 1st we will transfer our exempt employees to the bi weekly payroll. The first payroll in January ends Sunday, Jan 8th. Since the exempt employees were paid through Dec 31st on the semi monthly payroll they will only be receiving 40 hours on the first bi weekly payroll and 80 hours each payroll after that. The last payroll of the year the pay ends on Sunday Dec 23rd. That would mean in 2012 they will only be paid 2040 hours instead of 2080. Since the last week of Dec will be on a payroll ending in 201. Is this the correct way to handle the pay frequency change?

Answer
Salaried exempt employees are paid by salary and not by the hour.

This is not how I would handle paying the exempt salaried employees with changing from semi-monthly to biweekly.

They should earn the same annual salary each year. So in 2011 they should be paid their annual wage and in 2012 their annual wage would be divided by 26 payperiods instead of 24. You would not short one pay period.

If the employee earns 50,000 a year he/she should have earned 50,000 in 2011 and 50,000 in 2012. Hours do not count.  If the employee has earned the 50,000 before Dec 31 than there is where the pay is shortened.

The 50,000 employee would earn 50,000 divided by 24 payperiods or 2083.34 each pay period in 2011 for semimonthly payroll.

The 50,000 employee would earn 50,000 divided by 26 payperiods or 1923.08 each pay period in 2012 for bi weekly payroll.

No hours are used for exempt salaried employees.

Shirley

Shirley