Ask the Payroll Expert: How to Change to a New Pay Cycle

change pay cycle blog

Is your business considering changing its pay cycle? The reasons for changing vary, but we often hear from business owners and management who want to minimize the costs of processing payroll, while still staying within state laws. By changing to a less frequent schedule, they can accomplish this goal. On the flip side, your employees may express the desire for a different schedule. To increase employee satisfaction, your organization wants to grant their request. Regardless of the reason, one thing to always keep in mind is the importance of striking a balance between your interests as an employer and those of your employees. While you may want to adopt the most cost-efficient pay cycle for your company, your employees need one that is consistent and works with their existing financial obligations.     

Sept 25 CTT

Bill Stephens, Senior Payroll Administrator at Axcet HR Solutions, has compiled a list of 10 steps for employers who are considering changing pay cycles. Bill has more than 13 years experience in payroll outsourcing and tax compliance and will be speaking on this topic at the upcoming Midwest Regional Payroll Conference. You can read all about the upcoming event and find out more about Bill here.

According to Bill, by following the steps detailed below, you can help ensure a smooth transition. 

10 Steps for Changing Pay Cycles

  1.    Why make the change? Determine the factors for making a pay cycle change and evaluate its value for the business. Is it contractual or financial? Is there an employee culture where a pay cycle change might be an issue?
  2.    Pick a pay cycle. Select a pay cycle that works best for your business, as well as your employees. Do you have nonexempt employees who work overtime? Do you have exempt employees with contractual annual pay?
  3.    Check your compliance. Be cognizant of federal and state statutes when making a change. Does your state have a minimum pay cycle that is more frequent than the one you are selecting? Do you have multiple worksites in different states that may necessitate multiple pay cycles? To check your state’s requirements, visit the Department of Labor’s website here.
  4.    Get your system in line. Make sure that all deductions have been updated to withhold the correct amount per pay period, if applicable, including child support orders and other involuntary orders.
  5.    Extra pay period? If changing to a weekly or biweekly pay cycle, be aware changing cycles may cause a 27th/53rd check date in the current year, and will be an occasional concern in future years. Implement a plan of action for when this arises.
  6.    Adjust PTO accrual. Ensure your Paid Time Off plan changes to match your new pay cycle if time accrues per pay period.
  7.    Pick your time frame. If there will be a gap in pay, evaluate the options to provide your employees to ease the transition. Will you allow employees to cash in paid time off? Will you provide an abbreviated payroll? Is scheduling the change around a bonus cycle a possibility?
  8.    Inform your employees. Communicate clearly to your employees all the details of the pay cycle change.  Make sure they understand the importance of the change to the company and to them. Provide communication well in advance of the change so employees can prepare.
  9.    Let’s do this! Implement the pay cycle change. Provide an opportunity for feedback from employees and departments on the outcome of the change.
  10.  Congratulate yourself! You did it. 

How to Perform an Internal Payroll Audit

Want to leave it to the professionals? Axcet HR Solutions has more than 30 years experience and boasts one of the most experienced payroll teams in Kansas City. Here are the top five reasons small and medium-sized businesses should outsource payroll. 

Be sure to check out some of Bill Stephens' other popular payroll blogs: How to Perform a Paycheck Checkup and How to Use the IRS Withholding Calculator.

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Bill Stephens

Written by Bill Stephens