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Change Payroll Schedule
Our new ED wants to change our payroll schedule. We currently pay 1st and 16th with a tight turnaround for me to process – does not give managers a lot of time for review. She wants to change it to either every two weeks (26 pay periods instead of 24) or delay by a week. I have no idea what other non-profits are doing and would like feedback on others’ experiences.
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11 Replies
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Hi Kara…in my experience as a Finance Director I actually liked the change to biweekly payroll with the lag (e.g. a Friday pay date for the two week period ending the preceding Friday). It gives time for review and if you have hourly employees you are able to accurately capture the hours from their timesheets. Also helpful to have those actuals for grant tracking as well. Hope this helps and that others have experiences to share!
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I agree Wade. We went from semi-monthly pay to bi-weekly pay a few years ago. The pay period ends on Saturday and the pay date is the following Friday. It works out very well for all the reasons you mentioned.
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I also agree with Wade. I have done both and much prefer the biweekly schedule. Gives you time for follow up on per diems and hourlies in particular and is very reliable for staff.
During the change obviously you need to give the staff plenty of time to prepare and adjust their own personal payment schedules to match any change. And for budget purposes keep in mind that 26 payrolls means 2 months of 3 payrolls, so check your deductions and your cash flow plan.
Good luck!
Peggi
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We also do 1st and 16th of the month, however we are all salaried employees with not a lot of review needed. But I agree with Wade, I prefer the every 2 week pay cycle as well. I would assume a lot of your staff may quite appreciate the bi-weekly pay but I would caution to make sure they are well aware of the change long before you do it. Changing a pay cycle can change someone’s cash flow and could make it hard on employees. And also be aware of your accrual schedule when changing. Good luck!
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Hi. I had the exact same experience and changed to bi-weekly with a time lag as already mentioned. I found that I sometimes had to correct time after the fact for hourly workers when we used the semi-monthly schedule. Switching to bi-weekly with a lag ended that problem and also cut the angst of a short time period to execute payroll When switching I had to compute the differences for the changeover payroll calculation and decide how to handle the difference in net pay that affected hourly employees receiving a smaller check than they were used to. In some cases we included advances that were recouped over the next 3 payrolls,
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Hi Kara, A few years ago we switched to pay periods of the 15th and last day of the month. Our pay dates are then on the 5th of the month and the 20th of the month. Due to where the dates land on days of the week (or weekend) once and a while there is a bit of a quick turn around needed, however, it has suited our needs.
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Personally, in managing finance and HR I found semi-monthly easiest to administer, because it’s easier to split things like monthly benefits premiums, cleaner when crossing calendar and fiscal years, and cleaner mapping to grant spend downs that track on a monthly basis. Also I think staff find it easier to know that their paycheck comes on
specific dates each month, rather than every other Friday (because most
bills are due on specific fixed dates). But, some states actually don’t allow you to pay hourly workers semi-monthly, so it’s worth checking the laws in your state. Paying on a lag isn’t a huge change and does leave more room for approving timesheets, but keep in mind that you will need to account for the accrual each month of wages earned but not yet paid.Whatever you do, make sure to communicate clearly and far in advance with staff and help them understand how their paycheck will change. (Obviously the amount of each paycheck will change if you switch to bi-weekly, but also if you switch to paying on a lag, you’ll need to truncate a pay period so that you can keep pay dates, or you need to shift pay dates and people’s first paycheck will be delayed.) Cash flow is obviously very important and personal to people, and a lot of finance/HR folks seem to underestimate this when making a payroll change.