Monthly changed to Bi-weekly

safety

I present a hypothetical question. Let’s suppose a salaried ee is paid on a monthly basis and has received 10 of the 12 checks through October. In November the pay cycle is changed to bi-weekly and now has only four paydays through the end of the year. If the bi-weekly salary is calculated using 26 pay periods in a year then the ee has 4/26 annual pay coming for the rest of the work year, 4 pay periods, or 0.1538 annual pay. If that same ee was not changed to bi-weekly pay in November they would have 2/12 pay coming or 0.1666 annual pay. Am I missing something here or would that ee be loosing out on some pay in this scenario? While I am not in payroll it looks like the ee would be missing out on about 0.0125205 times their annual rate. Am I on the right track here?

bsa

You have the right idea. But, I think better in whole numbers rather than fractions, so the way I see this ... If you have someone making $100k/year that person could lose $1,283 for the year if you simply divided the 100k by 26.

In my opinion the fair way to calculate the pay for the last 2 months would be to ÷12 x2 ÷4 to calculate the remainder for this year. Beginning with the new year use the ÷26 method to maintain a 100k annual salary.

I hope everyone was informed how their paychecks are being calculated before this altered pay method became fact. If you used the ÷26 method for the remainder of this year, I predict many unhappy employees and a very long line outside your door.

Don D

What am I missing?
Hypothetical: Salary is 12,000 a year paid monthly, equals 1,000 per month. 1,000 per month divided by 4.33 weeks equals about 231 per week.

Hypothetical: Salary is 12,000 a year paid bi weekly, equals 12,000 divided by 26, equals about 462 every two weeks or about 231 per week.

If the guaranteed money comes out the same at the end of the year, does it matter? I stunk at math in school and still do. Maybe I don't understand what the company's doing. It may also be true that if the person quit in mid January, they would have a week or two of pay coming, whereas under the current system, they would not. Is that also possible? Over time won't they make the same money?

moneyman

I agree with Don's assessment, there is nothing missing. I think people confuse this issue by forgetting that 2-biweekly periods do not equal a month. I believe that is where you are "missing" the wages to make them equal. When you get down to paying this salaried person 4 more paycheck, isn't there still going to be time left in the year that needs to be paid? December 31st is in the middle of the week and unless this coincides with the end of the pay period, then you will actually be paying some of December hours in the first paycheck in January which would account for your differences in paying the full month of December in December.

marc

Hi Safety,

You will find this a significant issue for your ees. They will complain about the timing of the checks versus their bills, they will complain that two of the 2-week checks does not equal a month and they will completely ignore the two months in which three checks will be issued. They do not appreciate the issues with calculating overtime with a mid-week cut-off or any of the other valid reasons you have for the change. Communication is the real key, and being ready to deal with the disgruntlement. After a couple of months, they grousing will stop. When they experience their first 3 paycheck month, it will seem like a windfall because they will have adjusted to the two smaller checks per month.

We did this a couple of years ago. No turnover resulted, but there were some vehement protests.

You cannot look at the short term for the math. It is the same over the pace of a year, if you really need to get into the detail, figure a daily rate for people and show them the figures. Don't let them confuse you with the dates of the pay, the daily rate is the same with either system.