It may seem simple enough to divide employees’ salaries by 26 each year and pay 26 equal payments until the end of the year, but because that only equals 260 - and there are actually 261 workdays (M-F) most years – after a number of years the schedule falls farther and farther behind until 12 years down-the-road you are paying next year’s first paycheck 2 weeks before next year even starts! Stop it. The real calendar is adding a day each year (261) – and you are not keeping up (260). This chart dramatizes the slippage over 12 years: 12 years of ignoring the problem
There are a number of issues with getting behind with the payroll schedule.
There is no legal provision for paying wages before work is performed. The only one I know of is the one that allows for the prepayment of vacation pay – but that requires acceptance of the section at town meeting. (see MGL 44 §65) I imagine auditors would have a problem with it as well.
There is no legal provision for paying expenses before the fiscal year begins. I remember there was a provision for schools to purchase supplies in advance of July 1st if it was going to save money and because they needed to get ready for the school year, but I am sure it doesn’t include wages.
Paying a 27th pay every 12 years – what some do to correct the situation – is not a solution because it:
- Causes budgeting woes – towns have to increase the budget just this one year an extra 3.84%
- Is a misallocation of funds (because it is essentially paying an extra day for each of the prior 12 years).
- Just starts the cycle all over again, and has to be done again in 12 years
Skipping a payroll is not a solution either because it:
- Leaves the employee without regular funds for 4 weeks
- To a new employee this feels like they are paying for someone else’s mistake.
- Doesn’t fix the problem – it just starts the cycle over again.
The correct solution is to find the daily rate (or hourly) and multiply it by the number of workdays* in the fiscal year and budget that amount. Then pay by the day. Of course the regular two-week pay periods will be the same throughout the year (10 days), however the the first pay might be a mix of daily pay rates from the end of June, and the beginning of July. (Example: pay check dated Thursday, July 14, 2011 would include 4 days in June at last years daily rate of $80, and 6 days at the new year’s rate of $82, for a total of $812.)
*Over a two hundred year span there are 260 days 25% of the time, 261 - 62% of the time, and 262 - 13%. Click here to see the chart: Workdays Per Year