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How to Run a Complex, Semi-Monthly Pay

Posted by Christine Batten, PHR on Jun 27, 2017 9:00:00 AM
Christine Batten, PHR

iStock-490428684.jpgRunning a semi-monthly payroll for non-exempt employees can be challenging. It gets complicated because employers are required to track the actual number of hours worked each workweek (seven days) and pay overtime if more than 40 hours are worked in that workweek.

A common mistake is to assume 86.67 hours each pay period (or some other identical amount every pay period), however employers are required to track (and pay for) all hours actually worked (including overtime) each workweek, not an “average”. Unfortunately, there are not exactly the same number of workweeks in each month nor are there exactly the same number of days and hours in each semi-monthly pay period.

Let’s look at an example. Say the pay periods in a month are the 1st through the 15th and the 16th through the last day of the month. Let’s also say the business operates Monday through Friday.

Calendar_New -July17.jpg

In July 2017, the first pay period would have 10 workdays and the second pay period would have 11 workdays. If we assume the employee works an eight-hour day, then the following would be true.

  • Pay period 1 = 80 hours
  • Pay period 2 = 88 hours

But, what about overtime?

By the nature of running a semi-monthly payroll, some workweeks will begin and end during the same pay period; others will begin in one pay period but carry over to the next. This means you won’t know how much overtime is due until the following pay period. Let’s say the employer’s workweek is Monday through Sunday. In July 2017 the workweeks would be:

  • 1: July 3-9       (falls in pp 1)
  • 2: July 10-16 (begins in pp 1 ends in pp 2)
  • 3: July 17-23 (falls in pp 2)
  • 4: July 24-30 (falls in pp 2)
  •     July 31 is in pp 2 but that workweek ends Aug. 6 (pp 1 of Aug.)

Now that you can see how the workweeks fall in the month, let’s assume the following work hours each week:

  • 1: July 3-9     (falls in pp 1)                          43 hours
  • 2: July 10-16 (begins in pp 1 ends in pp 2) 45 hours
  • 3: July 17-23 (falls in pp 2)                          40 hours
  • 4: July 24-30 (falls in pp 2)                          41 hours
  •     July 31                                                      8 hours*  

July pay period 1 = 80 straight time hours and 3 hours of overtime

July pay period 2 = 88 straight time hours and 6 hours of overtime

* Even though the straight time hours for July 31st were paid in July pay period 2, if any overtime is worked in that workweek (July 31 – Aug. 6), it will be paid in Aug. pay period 1.

As you can see, accurate recordkeeping is a crucial step for employers who use a semi-monthly pay frequency for their non-exempt employees. We recommend employers use an electronic time and attendance tracking system in order to properly record and pay overtime.

Could These Common Wage and Hour Mistakes Get You Into Trouble?

Topics: Payroll, Human Resources, overtime

Christine Batten, PHR

Written by Christine Batten, PHR

Christine has over 20 years of HR related experience with a background in labor and employment law. She manages FrankAdvice, the premium HR service provided to business clients of FrankCrum. FrankAdvice offers senior-level HR advice on all aspects of the employer/employee relationship and includes a vast library of employment-related documents including various forms, policies and handbooks. Christine also manages the Employment Practices Liability Insurance (EPLI) claims process for both the FrankCrum corporate office and the client companies.

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