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Salaried Nonexempt - Paid Current

I know best practice is to pay nonexempt employees in arrears but does anyone have salaried nonexempt employees paid current?

We have a sizable population of employees that fall into this category. I would love to change them to be paid fully in arrears because paying current for this group is somewhat problematic (especially with adjustments for prior weeks catching up). We are discussing ways to transition them to arrears but it will take some time to get there.

Curious to find out if this is something other companies deal with (or have dealt with in the past).


  • Brainstorming....

    communication...lots and lots of communication over time that this is going to happen will be your most important mantra to making the change happen successfully. You are going to have to "win" them over to your side with a good argument from their point of view. (have you considered a focus group of actual employees who would be affected?)

    Also need to consider and communicate how this will affect any of their voluntary deductions/benefit plans (401k contributions or loan payments - will it throw their amort schedules off, tax payments if you cross the end of a year differently, garnishment due dates, etc)

    I would do it all at once rather than changing a day or two here and there. Rip off the bandaid rather than poking it here and there.

    Consider doing it around a time where there may be other wages such as commissions or bonuses that could help cover the difference.

    I am not sure what you mean by "paid fully in arrears" but you need to check state wage law to see what the latest date you have to pay them by is. We pay basically 5 days in arrears (week closes Sunday 11:59pm), timesheets are due on Monday when payroll is processed Monday/tuesday. Direct deposits have to be sent by Weds at 5pm to get paid on Friday. I can't say I have seen an arrears or a "holdback" of more than about 7 days. 7 days should be plenty of time to get time reports and process a normal payroll.

    You do need to also consider how it will affect employee retention, new hires and their first paycheck. If they see a large time holdback, it may influence them negatively (probably just "one more thing" rather than THE "thing" that makes them leave)

    You may need to look at advances, payroll loans to get through the first few paychecks/timing issues. This needs to involve written authorization/paperwork so that you aren't stuck if an employee leaves while still owing money. (Not my favorite, but depending on your workforce...)

    It's not a small project..but can be done successfully if you plan it well....

  • Thanks rrupert. I know paying salaried nonexempt employees current is not recommended. Believe me, I don't like the practice. The question has come up as to whether it's legal to dock a salaried nonexempt employee in a subsequent payroll for time they have not earned.

    For instance, let's say an employee was paid 80 hours of regular pay this past Friday but the employee had a sick day during the period. If the employee was out of sick time an adjustment would be made on next payroll for 8 hours showing “no-pay sick”. Total hours paid in the next payroll period would be 72. Would the “no-pay sick” adjustment be considered an illegal wage adjustment (reduction)? Or would it be considered a true up due to the timing of the payroll cycles.

    There have to be other companies out there paying nonexempt employees current. Wondering how they handle this.

  • The feds are ok with that action, as long as MW/OT rules are followed, they are ok with paying some it in advance.

    Some states are ok with your action. Some states are not. CA is not. You are on your own with the other 49 states.

  • Thanks David. So in are either forced to pay the employee in arrears or you can pay them current but you can't make an adjustment to their pay in a subsequent payroll cycle? Or, you can make the adjustment if you give proper notice or perhaps get approval from the employee?

    I know we need to move these employees to arrears. Just seeing what options are prior to getting that done.

  • Forget arrears vs. current for the moment and lets go more general. You overpay Bob. CA-DLSE says you CANNOT recover the money from Bob via payroll deduction. Period. No Exceptions. You can take Bob to court and try to collect that way but CA-DLSE is VERY clear that employers cannot use self-help methods to recovery any type of overpayment. This includes, but is not limited to, your example.

    Yet one more reason that no sane employer uses the current method.

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