A business may have clusters of employees with either different pay periods or similar pay periods that do not end on the same date. This situation may be caused by union agreements, poor planning, or perhaps acquisitions . Whatever the reason, the result is a payroll department that is continually processing payroll , which is not efficient. The solution is to change pay periods so that all employees are being paid on the same date. Or, in some cases, you simply want to switch to a different pay date, while still maintaining several different pay periods for different clusters of employees.

How to Change Pay Periods

Changing the pay period can cause problems for employees, who likely have spending patterns that are based on when they are paid. The following steps can make the transition process easier for them:

1. Assign responsibility . Changing pay periods can require full-time staffing to ensure that the process is completed properly. Consequently, you should assign an experienced manager to the job, with a full team working on the effort.

2. Verify legal issues . Work with your employment attorney to ensure that your proposed changes will not conflict with any labor laws.

3. Create a rollout plan . Create a detailed plan that itemizes all of the steps that need to be completed, along with the completion dates for each one, and the resources required.

4. Communicate the plan . Meet with all affected employees several times, to ensure that everyone understands the timing of the conversion process. This is also a good time to hear their concerns and plan to remediate them.

5. Implement the conversion . Initially conduct the conversion on a pilot basis with a small group of employees, to ensure that all issues have been dealt with. Only then should you roll out the pay period conversion to all targeted employees.

Pay Period Best Practices

There are several ways to configure your pay periods to be more efficient, while not bothering employees too much. Here are several options to consider:

• Increase pay frequency . If management has decided to pay employees more frequently than is currently the case, then there is no issue, since this improves the flow of cash to employees.

• Electronic payment . If employees are currently paid by paycheck , emphasize that switching to an electronic payment will speed the flow of cash into their bank accounts , usually by at least one day.

• Bridge loan . If employees will be switched to a longer payment interval, pay them an interest-free loan for the first bridge period, and gradually pay off the loans through automatic pay deductions in future periods. Thus, a switch from a weekly to a monthly pay period could call for the issuance of loans that equate to the three weeks of net pay in the bridge period.

• Halt use it or lose it requirement . If employees are currently required to use their accrued vacation time or otherwise lose it at the end of the year, allow them to roll it forward into the next year and then cash them out in the bridge period; this is essentially a pre-paid bridge loan, as just described.

Related AccountingTools Courses

Human Resources Guidebook

Optimal Accounting for Payroll

Payroll Management