I just got hooked up with the Forum and happen to know a couple of relevant things on this topic. Re computing OT with a semi-monthly payroll, we have had that schedule for years and ADP cannot do the necessary adjustments, which we must do by hand. In my opinion the issues with a bi-weekly payroll are nothing compared to the hassles of a semi-monthly schedule. The problem of OT needing to be based on calendar weeks and pay periods almost never falling on calendar weeks requires a lot of unnecessary adjustments, and even if you get it right it is practically impossible to explain to employees. And, depending on when you actually cut checks, you may have to use estimated hours and adjust for corrections in each following pay cycle. And, if you pay any bonuses (and many types of commissions) you also have to find a way to work those amounts into the OT calculation as "regular pay".

I'll take the 10-year 27th payday problem over the weekly/monthly hassles with a semi-monthly payroll!

To:  HRforME 

So, since you are paying on 12/31/08 instead of 1/1/09 you effectively have moved your 27 paydates in calendar year 2008 instead of 2009, correct?  We pay on every other Thursday, but 1/1/09 is a holiday so I am determining what the best practice would be.  In the past, our practice is if the pay date falls on a holiday, we pay the prior day.

Have you had employees upset when the 27th pay date occurs because it might cause them to fall into a higher tax bracket?

Actually the scenario I referred to happened back in 2005/2006. But we will hit the 27 payrolls in 2009 because of how it falls with 2010.

And the CFO and I have been discussing it and have decided for exempt salaried individuals that we will take the annual salary and divide it by 27 rather than 26 in 2009 so that the year end 2009 salaries will be what the employer expects to pay, rather than one higher. I am sure it will make some employees mad (because their biweekly will go down about 4%), but the employer can not take the hit of an extra payroll in 2009 unfortunately.  Not in this economy. In years past though they could and might have taken the hit.

In 05/06, I didn't get any negative feedback, only some questions about why their W2 for both years was first high and then low compared to their annual salary.  I didn't have one person complain about the taxable consequences....or that it changed their tax bracket.

 To answer your question on when you should pay if the paydate falls on the holiday, you need to check your state wage laws. Some have specific requirements. You can always do more, but not less than the state law. Our policy is to pay on the day prior, but I do know some companies (in misc states) that pay after.