Closing Payroll Early to Cover Holidays

Money suitcaseDid you know that businesses are supposed to follow regular payroll schedules? Businesses who don’t can get into big trouble so listen up if you’re new to this.

Employers can’t just pay their employees whenever they get paid from their clients and they can’t postpone payroll because they ran into a big expense. Nope. Employees must be paid in a timely manner, all the time. This means that a business should have some reserve for payroll because when the unexpected happens, employees still need to be paid.

If you think about it, you can see why it is so vital that employees are paid regularly and on time. Employees, just like anybody else, have bills and specific due dates for those bills. If they don’t get paid on time, they can’t pay their bills on time and that hurts their credit… bad. It is totally unfair to botch up an employee’s credit because your business is suffering and so that’s why there are laws against it.

On the flip side, if you don’t pay your employees on time, you can end up with a lawsuit that you probably won’t win. The DOL favors employees when businesses don’t follow wage and hour laws.

However, this doesn’t mean that you can’t set a schedule to make sure that employees get a check in time for the holidays.

Payroll Frequency Options

There are several standard payday options. These include:

  • Monthly
  • Bi-monthly
  • Semi-monthly
  • Weekly
  • Bi-weekly

Which you choose may depend on where you live, your employees’ occupations, or your company’s preference. Each state has its own rules for how often employees must be paid each month, but the exact timing of those payments is not government mandated. Check out this Department of Labor table to find out the required frequency of paychecks in your state. The majority of states require that businesses pay their employees at least twice a month (i.e semi-monthly). Some states impose different frequencies based on the occupation. This is all summarized in the DOL table.

Now, what can be confusing about these laws is that the frequency of payments is set in stone (for most states) but the exact dates on which the payments are to be made is not. This means that an employer can decide exactly which days employees will receive their paychecks. The reason this may be of interest to an employer is because some employers may occasionally want to get checks out to their employees slightly early, in time for holidays or other events.

Early Payroll for Holidays

A slightly irregular schedule is fine as long as long as the following conditions are met:

  1. pay dates are posted
  2. pay days fall within the required frequency
  3. employees are aware of the payroll schedule in advance

For example, a company in California might have a pay cycle from the 26th to the 10th with pay dates on the 1st and the 15th of each month. Adjusting the payday for an upcoming holiday could be done by making a payment in the week preceding the normal payment.

This is particularly easy to manage with salaried employees since their set pay amount can simply be issued a few days early. With hourly employees there are a couple of options:

  • Split the pay cycle so that the pre-holiday check consists of one week’s pay and the following check consists of the second week’s pay (only permissible in some states).
  • Forecast the time worked for the days that will be included on the payroll (in the employee’s favor). If the pay cycle ends on the 26th and you want your employees to get paid on the 24th, estimate the hours worked for the few days before the period close. (You can do this easily with manual entries if you use for your time tracking.)

Generally, these changes will be in the employee’s favor. Most people appreciate getting paid before holidays. There is food to buy for Thanksgiving, gifts at Christmas, and road trips during summer holidays. Advanced cash is usually welcome.

Maintain Pay Period Visibility

Even if your intention is to help out, you don’t want to surprise your employees and interfere with their budgeting. A good way to keep everyone in the loop is to plan ahead and make the pay dates visible. You can plot pay dates on a calendar and post the calendar each year. This way, employees will know way in advance of any irregularities and should be able to arrange appropriate payment dates for their bills. Not only is it nice, but it’s also mandatory in most states.

California Legislative Information:

“Every employer shall keep posted conspicuously at the place of work, if practicable, or otherwise where it can be seen as employees come or go to their places of work, or at the office… a notice specifying the regular pay days and the time and place of payment, in accordance with this article.”

One Comment

  1. Really awesome article.It clarify all doubts regarding how to,when and why an organization need a payroll service.It removed burden from shoulders of business owner.I would like to read such articles in future.
    Best Regards
    Piyush Thareja

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