Budgeting and Missed Paychecks: Nerdy payroll stuff
Word was issued around our company that exempt employees (that’s me since I’m salaried) will be paid differently this coming year (2008). Rather than getting a paycheck on the 15th and 31st (end of month), we’ll be paid on the 10th and 25th. No problem there.
HOWEVER, there’s going to be a problem with our budget. First, here’s an explanation of the reasons for the change:
- Since going public, our company is bound to some more stringent accounting rules than before. It’s too difficult to stay compliant to certain laws by the way they are currently handling paychecks, so they’re switching to a new method.
- Hourly employees currently get paid for what they worked, but 2 weeks late. This gives payroll a chance to tally the hours and ensure they’re paying for the true time worked.
- Salaried employees, like me, currently get paid for an assumption of what they worked for the 2 weeks that just ended. In other words, I get paid on the 15th for what I worked from the 1st to the 15th.
- A problem arises when the salaried employee puts in vacation, or leave without pay, or short-term disability, and payroll has to catch up in the next paycheck. There’s implications behind all that which I don’t care to understand.
So how does this affect me?
- Salaried employees (me!) will be paid like hourly employees: that is, AFTER you’ve put in your time for that pay period. However, we will all (hourly/salaried) only have to wait 10 days rather than 15 for the paycheck after submitting our time,
- On Dec 31, 2007, we’ll get paid for Dec 15-31st.
- On Jan 10, 2008, we salaried (exempt) employees won’t get a paycheck since we have to wait until AFTER we put in our time.
- Our first paycheck for 2008 will be on Jan 25th, for the hours worked from Jan 1-15th.
To finish this up:
- Our company will offer a one-time, no interest paycheck loan (for 1 paycheck amount) if it will be a hardship to miss the pay period. We don’t have to justify the loan, just pay it back. I assume it will be deducted throughout 2008 paychecks.
- We will catch up with the “lost paycheck” on Jan 10, 2009. However…
- We need to find out the tax implications of the paycheck slipping into the next year. Will that Jan 10th paycheck (for hours worked Dec 15-31st) be taxable for 2008 or 2009? Will we have to claim extra withholdings to cover that paycheck? I have an idea of the answer, but perhaps some of you could help answer this question while we wait on payroll’s response?
Interesting. Going public is always a hassle – the rules and regs can be a nightmare. At least your company is being mindful of its employees and offering the loan. That is very good on their part.
If you are given that money in 2008, it will be taxable for the 2008 tax year. If you are given the money on or before Dec 31st, it will be taxable for 2007.
If you want to do more research on that, google the words ‘constructive receipt’.
just depends on how it is reflected on your W2. I’d take the free loan, especially if you don’t need it and they deduct it from your paycheck over the 12 months. nothing like an interest free loan.
Whether your Jan 10th paycheck will be on 2008’s taxes depends on what they put on you W-2, obviously.
From your employer’s standpoint they will certainly show it in 2008’s expenses so there’s a good chance that it will be on your W-2. I would ask your accounting or HR folks though.
Hopefully, you won’t need to use that no interest loan. I’m glad they gave you some notice on this change.
Why not divide a single paycheck up and start shaving it off your current income? Then when the gap comes up, you just pay yourself.