Computing Semi-Monthly Payroll

AnneBeatty · November 2002

We pay our employees Semi-Monthly. Non-exempt employees work 7.5 hours per day. We have computed the payroll hours per pay at 7.5 hours per day times 5 days per week (37.5 hours) times 52 weeks per year (1950 hours), divided by 24 pay periods which equals 81.25 hours per pay. This is the base pay per period, with leave or overtime adjustments added for any hours under/over 7.5 per day. (With overtime paid for any hours over 40 hours per week, whether in current pay period or not.)

Annual salary is divided by 1950 hours to compute the hourly wage. Even though the actual hours worked per pay period may vary, everyone receives the annual salary they were quoted.

An employee hired this year didn't have a problem with the payroll being averaged, but claimed she was not being paid for all of the hours she would be working this year. She began work 07/01/2002. When I reviewed her case, I found that the actual working hours from 7/01/02 to 12/30/02 are 982.5 hours. Twelve pay periods at 81.25 hours total 975.0 hours. The reason for this is that 52 weeks times 7 days per week totals 364 days, one day short of a normal year.

I can re-compute the hourly salary and hours paid per period based on 1957.5 hours for this year, but is there a standard or precedent for this? And if so, how is leap year handled?

Thanks,
Anne

System · November 2002

Our company went from semi-monthly to every two weeks years ago because of these types of problems. It seems you'd have to do some complicated calculations for every employee's first and last year of employment, or else you'd pay them the wrong amount. With all the wage and hour litigation nowadays, I'd definitely switch to every two weeks.

James Sokolowski
Senior Editor
M. Lee Smith Publishers

Don D · November 2002

I agree with James. That's what we do here with all of our salaried people (exempt and non-exempt). The hourly people are paid every Friday. The rest of us, every other Friday. This leaves no margin of error. Watch those statements about 'You'll get what we quoted you as an annual salary'. That can easily be interpreted to be a contract.

Alice1 · November 2002

[font size="1" color="#FF0000"]LAST EDITED ON 11-25-02 AT 02:31PM (CST)[/font][p]Do the terms exempt and non-exempt apply only to salaried employees?
I am paid hourly and receive overtime for anything over 40/wk. I thought that made me a "non-excempt hourly employee"

Alice 1

System · November 2002

Alice, Yes, you're non-exempt hourly. Exempt employees are always salaried. Non-exempts are usually hourly.

James Sokolowski
Senior Editor
M. Lee Smith Publishers

Don D · December 2002

The FLSA has no 'concern' with whether or not you pay your salaried non-exempts bi monthly. Those you classify as hourly non-exempt must by federal law be paid weekly. We classify all of hour union hourly workforce, naturally, as non-exempt. We classify all other employees, even the non-exempts, as salaried and pay them bi-monthly. This (salaried) classification is for our own internal payroll convenience and does not interweave with FLSA. Even though the small number of salaried non-exempts are paid overtime (if earned) we pay them every two weeks, a guaranteed salary. Unless your state law prohibits that, you can choose that system of payment to meet your company needs.

Computing Semi-Monthly Payroll

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