For example, terminated employees in Colorado must be paid immediately, allowing for some exceptions. Employees terminated by their employer in Connecticut must receive wages in full no later than the next business day after the discharge. Watch how the amount in each check will differ according to the structure chosen. The employee worked 42 hours from the 1st through the 7th and 38 hours from the 8th through the 14th.
Overtime for each workweek must be calculated separately — meaning that even if the organization adopts a bi-weekly pay period, it cannot average those hours together to get 40 each week. Note, this does not account for tax withholdings or benefits. An organization selects the pay period structure that best fits the type of work it does, the needs of its employees, the labor laws where the company does business and other factors. But the pay period must be applied consistently during the calendar year to wages earned to stay compliant.
Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves interstate commerce. Certain industries also tend to favor certain pay periods — for instance, in construction, weekly pay periods are the dominant type of pay period, while financial and information technology industries are more likely to implement semi-monthly pay periods. Data from the U.
Bureau of Labor Statistics shows that the smallest establishments tend to exhibit the most variety in paying their workers. In considering what pay period to enact for your business, compliance and cash flow figure in heavily. Selecting a pay period or periods first requires taking into account the types of employees working at your company — exempt salaried and non-exempt hourly — and any unique state laws governing how they can be legally paid.
Remember, in some states, it is illegal to pay hourly workers on a monthly or even semi-monthly basis. A company also needs to pay close attention to its cash flow cycles in order to best determine how it can efficiently meet payroll.
New and smaller companies may have difficulty meeting payroll obligations because of cash flow concerns if they need to process it several times a month.
With that all in mind, select the right pay period for your business by considering factors such as state regulations, the cost of running payroll and other factors, including the following. Managing payroll for small businesses can be challenging. Aligning the workweek with the pay period simplifies overtime calculations and makes payroll that much easier to process. Under the FLSA, each business is required to define a workweek — a fixed period of hours, or seven consecutive hour periods.
Each workweek stands alone in calculating overtime for non-exempt employees. For instance, if an employee is paid bi-weekly and works 30 hours in one workweek and 50 hours in the next, she must be paid for 20 hours of overtime in the second workweek at a rate no less than time and one-half her regular rate of pay.
Understanding the costs associated with the process is a common payroll concern. Costs include compensation plus all employer-paid employment taxes and the employer-paid portion of benefits. Considering whether your employees are exempt or non-exempt from the FLSA will help you maintain compliance with overtime requirements and help narrow down your choices for pay periods.
A business with lots of non-exempt hourly employees may be better off choosing a pay period that eases that calculation and payment of overtime. Semi-monthly pay periods can present challenges in terms of complying with state laws for paying hourly employees, as well as accurately and efficiently calculating overtime pay.
Take into account what pay period structure might help with employee satisfaction. About two-thirds of employees say they wish they had access to earned wages earlier in order to cover bills and emergency expenses. More than half say financial stress distracts them from their work. The IRS released a new version of the W-4 form in aimed at reducing complexity and increasing transparency and accuracy of the withholding system.
It replaces the worksheets in the old form with questions designed to make accurate withholding determination easier for the employee, and it has new guidance for employers on ensuring enough federal income tax is withheld. Withholdings are complex and the regulations and processes are known to change. The platforms can calculate withholdings and process payroll, all while making sure you stay compliant and account for things like complex pay structures and multi-state business.
Companies are responsible for recording and reporting requirements for compliance with labor laws and employment taxes. Be mindful of how the pay period s you choose will help you best adhere to reporting requirements.
The FLSA requires employers keep records for each covered, non-exempt worker, which must log accurate information about the hours worked and the wages earned. Among the list of details a company must maintain is the total wages paid per pay period and the date of the payment and pay period covered.
The IRS requires that employers report wages, tips and other compensation paid to an employee by filing the required form s. Employers that withhold federal income tax or social security and Medicare taxes must file Form , Employer's Quarterly Federal Tax Return, each quarter.
This includes withholding on sick pay and supplemental unemployment benefits. Mistakes with payroll can result in fines and deeply unsatisfied workers.
In fiscal year FY , the U. Some common payroll mistakes include the following. Managing payroll is exceedingly complex and is absolutely crucial to get correct. With payroll software , you can configure pay periods and account for different periods for various classes of employees. It automates the calculation of earnings, deductions, company contributions, taxes and paid time off.
It can also process payment via direct deposit — ensuring employees get paid sooner and more securely than by paper check. All of this saves time and reduces errors. Many payroll departments are shifting their systems toward cloud-based solutions. Human capital management HCM is the process your business uses to hire, train and retain your workforce. Benefits of a well-managed HCM strategy include higher employee satisfaction, less turnover and a more efficient business.
Managing pay and payroll is an important part of HCM, and many people turn to HCM software that includes payroll processing to help. HCM is one of multiple core business software applications.
Another benefit of payroll software is it can help you keep track of metrics that show the performance of your team, like the number of payroll errors and the cycle time to process payroll, so you can set goals and improve processes.
These key performance indicators KPIs are displayed in simple-to-understand dashboards that can be made available to your team and other key stakeholders in the business. Selecting the pay period or pay periods for your business may seem like a simple decision, but it has a significant impact on your company and employees. The decision sets your business up to fulfill one of its most important obligations — paying the people it relies on. Managing different pay periods, accounting for complex pay structures and staying compliant with state and federal laws makes processing payroll complex.
HCM software can help you more efficiently manage the process, as well as integrate with other areas of your business and provide vital KPIs to track the performance of your team and help employees manage HR-related documentation, such as taxes and personal contact details.
With a bi-weekly pay period, employees will receive their paycheck every other week on the same day of the week — often a Friday. Bi-weekly pay periods mean there are 26 pay cycles a year — and two months will have three pay periods. The four most common pay periods are: weekly, bi-weekly every two weeks , semi-monthly twice a month on a set date and monthly once a month. The number of weeks in a pay period depends on the pay cycle adopted by the employer.
In a weekly pay cycle, there are seven days. In a bi-weekly pay period, employees get paid every two weeks. In a semi-monthly pay cycle, employees receive payment roughly every 15 days, unless the payday falls on a weekend, in which case payroll is typically processed the day before. In a monthly pay period, the employees are paid once a month — usually on the last day of the month. The number of pay periods always stays the same with monthly and bi-monthly.
But the number of times payroll is processed with a weekly or bi-weekly pay period structure can change depending on the year — including if it begins on a Friday like or includes an extra day leap year. There are 53 Fridays in — meaning that if the organization adopted a weekly or bi-weekly pay period and paid employees on Jan. For organizations that processed their first payroll of the year the following Friday, April and October will be the three paycheck months.
Payroll Explained: The Ultimate Guide. Companies that take payroll for granted may end up spending too much, alienating employees, even getting hit with hefty fines or lawsuits. While there are a lot of moving pieces—timekeeping, releasing funds to your…. Business Solutions Glossary of Terms. What Is a Pay Period? March 24, Pay Period vs. Pay Date: The employee does not receive his or her check at the end of the pay period, but a number of days after it has concluded, which is known as the pay date.
And it could create budgeting and cash flow issues for some employers whose payrolls could increase significantly and unexpectedly. That would seem to be require an individual-by-individual analysis. Just as importantly, it is possible that employees will claim that they have not been paid everything they are owed for work already performed or that their contracts have been breached, bringing wage theft claims in court or before a government agency.
At this time, there does not appear to be any case law, regulations or other guidance directly addressing this unique issue. That is not entirely surprising as the last time this issue arose was in , when the wage-hour climate was very different than it is now.
In the time since, we have seen massive wage-hour class actions, the passage of wage theft statutes, and a heightened focus on wage theft issues by government agencies. If they provide for a specific amount to be paid bi-weekly, then there would not appear to be any choice to be made — it would seem clear that the specified amount should be paid in each bi-weekly paycheck, even if there is an extra pay period in But if the offer letter or contract provides instead for the salary to be paid on an annualized basis, the employer will then need to weigh the risks of the approaches discussed above, or perhaps consider switching to semi-monthly paychecks.
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