Donna Genie explains legal constraints and practical best practices for payroll cycles. She emphasizes that hourly employees and salaried-but-nonexempt staff generally cannot be paid monthly or semi-monthly and instead require weekly or biweekly pay cycles (some states restrict biweekly). She recommends a biweekly schedule ending on a Friday and paying the following Friday to simplify processing and help manage overtime; she also recommends the payroll app Gusto.
Does your calendar have reminders plastered all over it of when you have to run payroll? Are you constantly receiving emails saying it's time, it's time? Well, let's talk about the structure of payroll, when to pay it and when you have to pay it. I commonly see a lot of problems with payroll setup that most people don't realize they have. Did you realize that if you have hourly employees or even salary employees who are not exempt from overtime, that you cannot pay them monthly or semi monthly, meaning the 1st and the 15th, you must pay on a weekly structure or bi weekly. And there are a few states who even don't allow biweekly. So be careful about your payroll cycle setup. Make sure that you're keeping this streamlined as much as possible so it's not as much of a headache for you. And for that reason, I suggest bi weekly. Why? Because it's half the work weekly. You only have to run payroll every other week. Now again, you do have to remember this is the week. But the optimal setup that I've come across is to have the pay period end on Friday of one week, then pay the following Friday. So that two week cycle ends on Friday, pays next Friday. The reason why do we pick Friday? What if I'd like to end in the middle of the week? Well, you can. But the reason we select Friday is for most retail oriented businesses or businesses where people may work on the weekends, you want to be able to control the overtime. So let's say it's the holidays and you have a retail location and you had a whopper of a Saturday, Black Friday comes along and you've got that whole weekend. You you can control overtime by reducing hours on a Monday or Tuesday or Wednesday when your business may be slower. So if we end the cycle on a Friday and Saturday is the start and someone works 12 hours on Saturday, well then you can have the chance to reduce their hours on Tuesday when you're not as busy and eliminate paying time and a half. Now I mentioned that you can't do monthly or semi monthly. Why not? The Department of Labor says so because you can't keep accurate records for overtime purposes. 40 hours a week increments. If you're paying based on 15 or 16 days or based on 30 days. So the only case you can have a monthly payroll or semi monthly is when you have salaried employees who are completely exempt from overtime. And that's pretty rare these days in a retail situation or a small business setup. So be careful that your payroll cycle meets the standards of the department of labor and make sure it's super easy for you. If you're looking for an easy way to streamline your payroll processing, we utilize Gusto and recommend their app. If you'd like a little discount, let us know and we'll get you hooked up. Thanks.
