Can they really withhold another weeks pay after all these years????

[2HOTinPHX]

going on ten years at megacorp...get an email from payroll today reads something like this today....

Megacorp will need to make changes to our payroll payment periods in order to stay in compliance with evolving laws. Starting on May 22 your bi-weekly paycheck will include compensation only for the period through the prior week. Specifically, the May 22 paycheck will include pay through May 15 and the following paycheck on June 5 will include pay for the period May 16 through May 29, and so on thereafter. This will result in a one-time effect of the May 22 paycheck being only for one week’s pay. All other pay periods will resume with two weeks of pay and each employee will receive the same aggregate pay throughout his/her duration of employment time at Megacorp.

We do realize the one-time effect of having the May 22 paycheck include only one week’s amount of pay could create an issue to some employees. And so for this transition, we are allowing affected employees to “cash in” 5 vacation days in order to avoid any negative impact to his/her bi-weekly pay amount. We will assume that you want to “cash in” 5 vacation days, or all your days if you have fewer than 5 accrued vacation days unless you advise the Payroll department that you do not want to do so. We appreciate your cooperation with this matter. Many other companies have had to implement the same payroll changes in order to be compliant with law and this is a necessary transition that must be made. That said, we want to re-iterate that this change will not negatively affect any employee’s aggregate total pay while being employed at Megacorp.

This seems so messed up to me....is it legal?? Nice of them to allow to cash in a week of vacation to cover a week of pay for a change they need to make!!!
emails like this always ends with something like 'its what other companies are doing"...BS. Same crap they used when they froze our pensions, meanwhile all the execs rake in $$$$$$ selling their millions of discounted company stock shares......

 

[Telly]

Yes, it's legal. A Megacorp did that to me oh, 15 - 20 years ago. The people who lived check to check seemed to be the most upset back then. It's not uncommon, to shift the dates with a delay in actual payout.

 

[Lakewood90712]

The week holdback is pretty much standard for the last 30 + years , excepting very small businesses who pay daily or weekly.I'm surprised they haven't done this years ago.

The "Government compliance" BS really means a staffing cut in accounting/payroll , and need the extra week to be able to fix discrepancies before the payday run.

The exec's exercising stock options ?. Large share owners can put a stop to it if they chose.

If you hate the place, start looking for something better. I stayed at megacorp for nearly 20 years , just looking at a pension after 30 years / age 55.

Hated the job for the last 5 I was at megacorp , finally wised up, left at age 40 . Even with blatant age discrimination abound, found greener pastures elsewhere.

( PS the job function I left at megacorp disappeared about 6 years after I left so hanging on would have been futile)

 

[pb4uski]

To my knowledge the part about to stay compliant with evolving laws is BS. At my Mega we were paid bi-monthly (15th and last day of the month) for the period in question, but we were all salary so it was pretty easy.

I'm not sure what the benefit is to the company of doing this.. it doesn't change their expenses one iota since any unpaid comp would need to be accrued at the end of each accounting period. There might be a minor cash flow implication but it is temporary and of little value with today's low interest rates.

The OP's Mega's assumption that its employees live paycheck to paycheck and will want to cash in 5 days of vacation is a bit disingenuous.

 

[Texas Proud]

To you main question... as others have said it is legal... heck, if they want to delay 2 weeks they can...


I will give you a different change.... I worked for a company and it was taken over by someone else... the first company calculated your 'hourly' rate by taking your annual salary and dividing by 2080 (52X5X8).... new company divided it by 2088... (the actual number of work days in a year)....

Does it make a big difference Nope... but it does show up on a paycheck...

 

[JoeWras]

I'm not sure what the benefit is to the company of doing this.. it doesn't change their expenses one iota since any unpaid comp would need to be accrued at the end of each accounting period. There might be a minor cash flow implication but it is temporary and of little value with today's low interest rates.

My guess: it is not uncommon for employees who quit to have debts to the company. Perhaps it is negative vacation, for example. It happens.

This helps easily recover that debt.

 

[athena53]

My guess: it is not uncommon for employees who quit to have debts to the company. Perhaps it is negative vacation, for example. It happens.

This helps easily recover that debt.

It could also be for unfiled expense accounts. Nobody gives out cash advances anymore- that was frequently abused- but many companies issue a corporate credit card and some, such as GE when I was there, pay the bill. It messes up the books if you don't file an expense account so they can charge it to the right cost center/project/client. I could see them wanting to take it out of your pay if you didn't show the business purposes for which it was used. There are also occasional cases of people charging personal expenses on the card and this would be one way to recover them.

Interest rates are minimal or I'd figure Megacorp just wants to sit on the cash awhile longer. I worked for a sub of American Financial in the mid-1970s and they introduced a one-week delay. Their excuse was that most paychecks were generated by computer but a few had to be done manually because of changes that couldn't be put into the system in time, and this would reduce the number of manual checks they had to create. They actually offered loans (to be paid back from future pay) if it proved to be a difficulty. It was gradual, so painless for most of us. During January and February your pay that would have been on Friday was deposited the following Monday, during March and April it was deposited on Tuesday, etc.

This company was VERY savvy financially. Back when SS wasn't withheld form sick pay, they realized they'd been withholding it and filed for a refund. Of course, anyone who'd taken sick days that year got a refund of their contribution, too.

 

[HFWR]

"They" can do pretty much whatever "they" want...

 

[marko]

My company held back my first week's pay on my first week in 1972.

Let's just say that by my last week in 2005 my week's pay had (ahem) grown considerably; took DW to Mexico on that 'extra weeks' pay.

 

[Theseus]

State laws on wage periods vary, checking those online should not be difficult. Save that email, I still have a paper copy of a memo that explicitly stated that our pay was, and would remain to be in arrears when payroll was switched from weekly to bi-weekly over 15 years ago. When I retired the powers that be, none of who were on board at that time of the payroll change, claimed that was not the case and shorted me a weeks pay at the end. That memo is in my folder, and will be evidence in my state wage claim if necessary.

 

[growing_older]

To my knowledge the part about to stay compliant with evolving laws is BS.

Maybe there are state rules? My company just went the other way, moving from a pay scheme that was one week behind to one that pays out in full all work up to and including the payday. It seems like a headache for accounting, but people really celebrated the week of the switchover when they had an extra week in their paycheck. I don't see how this can be a legal requirement if companies are switching in both directions.

 

[scrabbler1]

At my old company, those paid a straight salary (Exempt) were paid without a pay lag, while those paid hourly were paid on a 2-week lag, with overtime hours paid on an additional pay lag. When I first switched to working PT in 2001, there was a 2-week period where I did not get a paycheck. When I left the company in 2008, I got an extra paycheck for the pay lag, at my current hourly rate.

 

[pb4uski]

State laws on wage periods vary, checking those online should not be difficult. Save that email, I still have a paper copy of a memo that explicitly stated that our pay was, and would remain to be in arrears when payroll was switched from weekly to bi-weekly over 15 years ago. When I retired the powers that be, none of who were on board at that time of the payroll change, claimed that was not the case and shorted me a weeks pay at the end. That memo is in my folder, and will be evidence in my state wage claim if necessary.

Doesn't each paystub indicate the period of work that the check is for? Ours did... we were paid for the 1st of the month to the 15th on the 15th and for the 16th to the end of the month on the last day of the month.

 

[2HOTinPHX]

Thanks to all for the replies. I spoke to someone in payroll and they said currently we are getting paid thru the Friday our checks are deposited...even though we submitted our time card the prior Friday for the last two weeks. Apparently they have been using our time cards we submit and changing the pay period dates on our pay stubs....person I spoke said they have been advancing us for the current work week and our time card is out of sink with our paycheck for some reason. I am going to get more details on how this happened tomorrow.

 

[Totoro]

I'm not sure what the benefit is to the company of doing this.. it doesn't change their expenses one iota since any unpaid comp would need to be accrued at the end of each accounting period. There might be a minor cash flow implication but it is temporary and of little value with today's low interest rates.

Also working capital reduction, which boosts return on capital employed. Better return on capital employed = more attractive for investors.

Not a big effect indeed (just one week), but payroll can go up to 70% of a company's expenses so it can add up. Probably not why did it though.

The OP's Mega's assumption that its employees live paycheck to paycheck and will want to cash in 5 days of vacation is a bit disingenuous.

Yeah. It's a bit less shameful though to ask not to pay it out than admit you are one of the working poor, so the default option this way looks nicer I think. They might also want to convey (poorly) that it's not about the money.

 

[MichaelB]

If the company accrues correctly, there shouldn't be any savings in direct payroll costs. There would be a nice one time bump in cash generation. It is also a clever way to reduce the vacation accrual, and that does flow through to the bottom line.

 

[Theseus]

Doesn't each paystub indicate the period of work that the check is for? Ours did... we were paid for the 1st of the month to the 15th on the 15th and for the 16th to the end of the month on the last day of the month.

Yes, they do. I found a date discrepancy when a change in third party pay statement providers was made at the beginning of 2014; seven additional days where shown to have elapsed since the end of the previous pay period when compared to years worth of previous statements. When I pointed that out "the it always was that way" defense kind of fell apart, but the local powers that be remained unswayed. I've done my due diligence in attempting resolution and could now turn it over to the state to deal with, although I've got a few more contacts at megacorp I've dealt with before that might rather fix it before it becomes a legal entanglement. It's hardly an ER buster, but the principle of the matter is important to me.

 

[2HOTinPHX]

Mystery solved. I spoke to payroll again today and there was no hold back when we started. We get paid every two weeks but my first time card 10 years ago was for one week but they added 40 hours for the next week to the pay check as they pay current instead of holding back. The check was so small back then I didn't notice it was for 80 hours....LOL... They have been doing it this way ever since. I guess they had some payroll lawyers review this and they said no it should not be done this way. So ten years later they want to hold back the one week. Better late than never I guess.....Megacorp mega-screw-up....

 

[FUEGO]

At the state, we had a 2 week hold back period (ie work from April 1 to 15 gets paid for on April 30 payroll). The nice part is getting let go and the paychecks continue for just a little while so you can rejigger your finances.

I'd say it's completely legit to change the payroll process as long as there's notice to the employee and the new payroll process and timelines comply with state law. Especially in employment at will states where they can dismiss you or you can quit for any reason or no reason at all.

 

[pb4uski]

Also working capital reduction, which boosts return on capital employed. Better return on capital employed = more attractive for investors....

If they accrue earned but unpaid compensation and vacation pay liabilities properly, where does the working capital reduction come from? Any reduction in accrued vacation pay would be offset one-for-one by an increase in accrued salaries so working capital would be unaffected.

Besides, the impact on ROE would probably be less than rounding so I doubt that is it.

 

[Texas Proud]

You know... I was thinking back and I had a company do the same as the OP... kinda forgot about it....

I do remember that instead of 'shorting' us a week, they 'lent' us money so our 'pay' would be the same... we had to sign a stmt saying we would owe the money when we left... I actually do not remember if they took it back, but I think they did....

For all new hires there was not an issue....