Many payroll departments are fully occupied with processing some kind of payroll every week, and possibly even several times in one week. The latter situation occurs when different groups of employees are paid for different time periods. For example, hourly employees may be paid every week, while salaried employees may be paid twice a month. Processing multiple payroll cycles eats up most of the free time of the payroll staff, leaving it with little room for cleaning up paperwork or researching improvements to its basic operations.

All of the various payroll cycles can be consolidated into a single, company-wide payroll cycle. By doing so, the payroll staff no longer has to spend extra time on additional payroll processing, nor does it have to worry about the different pay rules that may apply to each processing period—instead, everyone is treated exactly the same. To make payroll processing even more efficient, it is useful to lengthen the payroll cycles.

For example, a payroll department that processes weekly payrolls must run the payroll 52 times a year, whereas one that processes monthly payrolls only does so 12 times per year, which eliminates 75 percent of the processing that the first department must handle. These changes represent an enormous reduction in the payroll-processing time the accounting staff requires.

Any changes to the payroll cycles may be met with opposition by the organization’s employees. The primary complaint is that the employees have structured their spending habits around the timing of the old pay system and that any change will not give them enough cash to continue those habits. For example, employees who currently receive a paycheck every week may have a great deal of difficulty in adjusting their spending to a paycheck that only arrives once a month.

If a company were to switch from a short to a longer pay cycle, it is extremely likely that the payroll staff will be deluged with requests for pay advances well before the next paycheck is due for release, which will require a large amount of payroll staff time to handle. To overcome this problem, one can increase pay cycles incrementally, per- haps to twice a month or once every two weeks, and also tell employees that pay advances will be granted for a limited transition period. By making these incremental changes, one can reduce the associated amount of employee discontent.

Review the prospective change with the rest of the management team to make sure that it is acceptable to them. They must buy into the need for the change, because their employees will also be impacted by the change, and they will receive complaints about it. This best practice requires a long lead time to implement, as well as multiple notifications to the staff about its timing and impact on them. It is also useful to go over the granting of payroll advances with the payroll staff so that they are prepared for the likely surge in requests for advances.

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