Timekeeping Methodologies

dpharm

I am new to addressing timekeeping methods and am reviewing our methodology for calculating paid hours of work. I have encountered a process issue, the correct use of calculating work hours, and the most appropriate method for employer and employees for receiving pay for work. Currently, I use a time clock for non-exempt personnel. We manually calculate hours worked from the previous two complete week timecards. I pay on the 15th and the end of the month (24 pay periods).

I have been told that due to 5 week months in a year, the standard pay period is 86.66 hours versus 80 hours.

I have spoken with several persons who indicate a couple of methodologies exist to accurately calculate and pay the employee but no one could show me in writing the various methods. Each method varies from 24 or 26 pay periods and the work calculated by work performed/earned or work projected (if pay is calculated prior to the 15th or end of month).

Is there a standard methodology to calculate wages appropriately? Is there more than one method - if so, what are they? Is it possible to designate a set day (e.g. 2d & 4th Friday), then pay for the two prior complete weeks? What happens when the month has 5 weeks in them? Any guidance would be greatly appreciated as I have to resolve this before the end of the month?

Thanks.

Carol CA

I would suggest that you change to 26 pay periods. You say you are paying people for two weeks at a time. If that is true, there is no way you can have 24 pay periods. 24 x 2 = 48 weeks instead of 52. It is much easier to pay two weeks at a time, which is an even 80 hours, and would equate to 26 pay periods. We pay every other Friday for the two weeks ending the prior Sunday (which allows you processing time). For example, our next pay day is this Friday, 1/18. We will be paying people for the two weeks ending 1/13 -- the week of 12/31 & the week of 1/7.

Hope that helps!

bsa

The only organization that I know using the 1st/15th paydates is a state agency. Using this pay method is an accounting nightmare because you will overpay one paycheck, then adjust the next paycheck and overpay or underpay, then overpay/underpay again and again and again. Throw in a little vacation, sick and questionable absences and you are lost!!

I agree with Carol and would also recommend paying every 2 weeks (26 paydays). DOL says that you must notify your employees what day is payday and that you must stick with that day, but you can change the designated day by notifying your employees of the change. Also don't forget to pay overtime for over 40 hours in each week.

dpharm

Thank you for your advise. 26 pay periods would increase the administration and preparation time. Are there many small business going to electronic timekeeping? Are there excellent automated timekeeping systems available? Where would I find them?

Thanks

Carol CA

Although you are right that doing 26 pay periods is more than 24, in the long run it is really easier as you are on consistent 80 hour pay periods. The 2 extra pay days are worth the simplicity. There are lots of companies out there to help you. We have our own automated system called Visibility which is for manufacturing companies. It is an ERP system which tracks the costs to various job orders. For simply payroll purposes we had a lot of success with ADP, but there are also other companies out there such as Kronos, Paychex, etc.

Good Luck!