What is a pay period?
Pay periods are a range of dates used to calculate an employee’s income. For example, if a worker is earning anhourlyrate, their hours worked over the pay period determine their gross pay for that period. Companies often pay their employees weekly or bi-weekly,sothey have pay periods that correspond with how often they conduct payroll.
To give the payroll department enough time to calculate every employee’s income and withhold money toward taxesand voluntary programs, businesses don’t pay employees at the end of a pay period. Payment is usually delayed by one or two weeks. Companies that have longer pay periods tend to have longer delays.
What is a pay date?
The pay date is the day that employees receive their checks or direct deposits. Some direct deposits are processed early, so an employee with direct deposit might receive the money on a Thursday instead of Friday – when paper checks are delivered. Since each employee has a unique banking situation, there can be variation between when employees report being paid each week. One bank may make the funds available a day or two sooner than another, and this isn’t something that your business has the power to change.
Whatarepayroll runs?
Depending on the type ofpayroll software or service your business uses, your payroll runs may occur two to four days ahead of a pay date. For example, you might submit your payroll runs on Monday, knowing that it takes four days for the payments to process. This is common when businesses have pay dates that occur on Fridays.
Due to the processing time required to deliver payments, businesses that pay weekly may pay for the period that ended two weeks before the pay run. This gives the payroll a week to ensure that the payments are accurate before initiating the run four business days ahead of delivery. Companies that pay bi-weekly or semi-monthly might have more employees and need the extra time to ensure that the payroll is accurate for the previous pay period.
What happens when a pay date occurs after a new year?
Income taxes are calculated as any money earned and received during the calendar year. If an employee earns money but isn’t paid until after January 1st, the income earned during the last week or two of the year might not show up on their W-2 or 1099 for that year. Employees may approach you for clarification on this matter because they’ve already calculated their earnings and notice a discrepancy.
For example, your business has a bi-weekly pay period, and the pay period ended on December 17. It takes two weeks for the payroll department to initiate a pay run. The payment isn’t received until the following week, which is in January. The income for this pay period won’t be reported for this year and neither will any income made for the rest of December.
The income that is paid in the next year is reported for that year instead. Most employees only notice this discrepancy during their first year with an employer. There may still be some minor discrepancies in the following years, but they’re less noticeable due to the carry-over into January’s income.
Communication with employees
The occasional payroll error can occur. Educating your employees on your payroll practices helps them resolve these issues with less confusion. When onboarding a new employee, it’s important to explain how payroll works so they know how to review their pay stubs and ensure accuracy.
The pay period, hours or salary, withholding and deductions for other purposes should all be printed with the paycheck or included on the pay stub. Employees can then compare their checks with their own records and know that their pay is correct.
