How to Handle Salaried Employees When Changing Paydays

by Barbara

Our company is looking at changing our paydays mid-year. We have a bi-weekly payroll- both exempt and nonexempt. For 2012 to date our payroll has been calculated based on a 26th payday year for our Salaried folks (1/26th of annual salary each payday). By changing the payday our "26th" payroll will be pushed into 2013.


As a result our Salaried employees will be paid 1/26th of their annual salary 25 times this year. For example, an employee with a salary of $52,000 will receive 25 payment of $2000 for a salary of $50,000.00. I feel this is incorrect and that the bi-weekly pay should be adjusted to compensate for only 25 paydays instead of 26. Is this correct?

Comments for How to Handle Salaried Employees When Changing Paydays

Average Rating starstarstarstarstar

Click here to add your own comments

Rating
starstarstarstarstar
Complicated Fix--or Easy Fix
by: Best Business Payroll

The most painless way to change pay dates would be to wait until the end of the year to make the change, but if that is not feasible, there are ways to make your employees' pay come out correctly.

Clearly you understand that the IRS does not care when the money is earned; they just care about when the money is paid. By moving your check date you are going to have a 2012 payout go into 2013 taxes. There are several complex ways for you to rectify the situation for your salaried employees.

You are correct that you could adjust everyone's pay to reflect the 25 pay periods (adjusted again, of course, for those pay periods already paid) so their salary would equal $52,000 for 2012.

The one easy way (which you may consider a cop-out) would be to keep your existing 26 pay periods, but back up the final check date to the Monday the 31st of December for this year only so that the check date will actually be in 2012. Then just pick up your new schedule again for the first pay period of 2013. The main drawback to that is that your employees may complain about having more than 14 days between the old pay date and the new.

Whichever way you choose will take extra work and possibly require some extra public-relations with your employees selling them on the "easy way". Best of luck.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Payroll FAQ.