Accounting, Payroll & Pension Issues/Semi-monthly to bi-weekly conversion

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QUESTION: We had one of our locations paid as semi-monthly in 2011.  In 2012 we converted them to bi-weekly.  Their last pay in 2011 was on 12/30/11 and they were paid current.  We took their annual salary amount divided by 26 and began paying them with our 1/20/12 pay for the period of 1/1/12 to 1/14/12.  Employees feel they were shorted for the year.  Did we not handle this transition correctly?

ANSWER: If you started your first payperiod on January 20 how did you get 26 pay periods in 2012? you would have only 1 payperiod in January of 2012. I would think this is what the employees are talking about. If would mean you only had 25 payperiods in 2012 and they would have been short because you divided the salary by 26 payperiods but only paid 25 pay periods. Go back and count the pay periods on your calendar.

Shirley

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QUESTION: We had a pay on 1/6/12 for our other locations but did not pay the semi-monthly employees because they had been paid on 12/30/11 for the pay period that we were paying other exempt employees for on that 1/6/12 payroll (12/18 through 12/31).  My CFO felt that the location we were transitioning to bi-weekly would have still been being paid in advance and not arrears like our other salaried staff members.

ANSWER: The December 6 would be correct. I understand that they were paid through the 30th. All I am saying is that if you count the payperiods because of the way you paid through the 30th and had the first payroll on January 20th you only had 25 payperiods for these employees for 2011. Thus being the case their salary should have been divided by 25 and not 26.

So if the employee made 50,000 a year you divided it by 26 for a pay period amount of 1923.08.
Actually it should have been divided by 25 for a pay period amount of 2000.00.

That means that the employee making 50,000 was shorted by the difference between 2000 and 1923.08 which is 76.92 a payday times 25 paydays for a total of 1923.00 or basically 1 payday.

Shirley

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QUESTION: Sorry your response has me confused.  What are you saying for December 6th??  In 2011 the semi monthly exempt employees were paid 24 pays with the last payroll being dated 12/30/11.  You are saying that by starting them on 1/20 they only had 25 pays in 2012?  That is correct but my CFO is factoring in pay periods and I believe you are saying that has nothing to do with annual salaries correct?

Answer
No the ones paid on January 6th are okay. The employees paid on December 30th and than paid only 25 times in 2011 were incorrect. The amounts were divided by 26 and you only paid 25 times if the payroll started on January 20th as you only had one payroll in January.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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