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Jun04

Payroll Cycles for Exempt & Non-Exempt

We have separate groups of employees working in OR and CA, with exempt and non-exempts in each location. Our payroll is currently administered on two separate bi-monthly cycles. Exempt employees are paid immediately following the pay period, and Non-Exempts paid one pay period in arrears so actual hours worked are paid, not estimated. This causes some confusion with employees and when it comes to reporting payroll.

At this point, we are looking at ways to streamline this process and possibly bring everyone on the same cycle.

I am wondering what the recommended best practice is relative to administering payroll cycles for exempt and non-exempt employees? To be on the same cycle, it seems like either 1) ALL employees should be paid one pay period in arrears, or 2) non-exempt payroll should be brought forward with the hours worked in the final 2-3 days of the pay period estimated, with any adjustments applied against the following period.

I want to make sure we are in compliance with applicable State law regarding payment of overtime, deductions for unpaid leave etc.

The US Department of Labor states that different workweeks may be established for different employees or groups of employees. Averaging of hours over two or more weeks is not permitted. Normally, overtime earned in a particular week must be paid on the regular pay day for that period in which wages are earned. You may establish the workweeks or pay dates.

The second method in your question of establishing pay period is acceptable. In other words paying all employees current and adjusting for the 2 or 3 days for any overtime, vacation, sick or holiday time. This does create an administrative burden for payroll. I would caution that if you decide to change the payroll cycle you provide ample notice to all employees.

This entry was posted on Monday, June 4th, 2012 at 12:54 pm and is filed under
Human Resources Management.
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