Going from weekly to monthly pay - how?

[simon field]

Greetings

As part of our efforts to drag ourselves into the 21st century, we are going to stop running payroll weekly, and make the transition to monthly pay.

We have four employees currently, and they may be likely to kick against this, to varying degrees. We would like to implement this at the end of January if possible.

So, we've tried to get our heads around how to offer them bridging loans so that they aren't (or don't feel) out of pocket or hard done by. We don't want to give them (for example) 2 grand upfront if we can avoid it, so then we looked at weekly loans or as and when required. But of course whatever we do, it needs to be paid back in manageable instalments.

Does any helpful person have experience of this? We want it to be fair both ways but keep coming up with a mental blank. It can't be that hard can it??

 

[Deleted member 335660]

Interesting problem, wasn’t aware anyone except casual were still paid weekly.

I guess this move is going to save you money so some little bonus to them, especially if they have been with you a fair time, may help both sides in the transition.

I hope some HR expert responds to your post and gives you some ideas.

I can only think that there is also a money management element here in terms of will they have bank accounts, will they be careful not to spend their months money up front and then run into debt.

If they are on £2,000 a month then they will have one weeks wages, so only need 3 weeks or so to cover before they are paid again. If you did give a bonus then this would reduce it a little more. You would need to make some agreement in case they left before paying the loan back.

I was wondering if you could phase it in by paying something like two weeks in arrears and two weeks in advance and gradually move to four weeks in arrears. Might be better than getting mixed up in the issues of loans.

 

[WaveJumper]

I would also suggest you should give them as much notice of the changes you wish to implement as possible. What does it say in their contracts about this.

 

[intheTRADE]

Interesting problem, wasn’t aware anyone except casual were still paid weekly.

It's a lot more common than you may think, especially in the construction and home services sector.

My Dad's joinery company for example employee 17 PAYE employees and they still work on a weekly payroll - I actually don't know a tradesperson that would work without being paid weekly

 

[Newchodge]

Yes it can be that hard, psychologically and financially, for employees.

Many weekly paid people are also on low incomes. which in turn often means minimal savings, so there is a need to consider how they will survive during the period of zero pay. One way of doing this is to consider carefully both the date on which they will be paid and the period the pay will cover. Many assume that monthly pay means being paid on the last working day of the month for the entire month but that does not have to happen. It is not unusual to pay mid-month for the entire current month - half in advance, half in arrears.

Considerations

• are they on fixed pay, fixed pay plus overtime or variable pay? Can they be moved from variable pay to fixed plus overtime?
• do they get company sick pay or SSP? If they are likely to be paid SSP only (perhaps after a short period of company pay) you want to pay in arrears as much as possible.
• are any of them on universal credit? If they are, moving to monthly pay is a benefit for them.
• would they appreciate professional budgeting advice? A lifetime of weekly pay often means weekly bills and help sorting this out, both mentally and practically may help, plus ways of avoiding binge spending when the largest amount they have ever been paid hits their bank accounts.
• do they all have bank accounts? weekly pay for a small workforce is sometimes paid in cash; help setting up bank accounts and dirct debits may be needed.
  
• if you are going to offer loans I would do them on the basis of full repayment every payday
• an incentive bonus of, perhaps 10% or a fixed sum may help, perhaps paid in 3 instalments.
• choose the switchover date carefully. January may not be the best option as staff will face a period of reduced income immediately after the most expensive time of the year.
  
• whatever else you do, talk to your staff and listen to what they have to say.

 

[Newchodge]

I was wondering if you could phase it in by paying something like two weeks in arrears and two weeks in advance and gradually move to four weeks in arrears.

Please don't. Changing pay dates once is traumatic and can be a problem for payroll. Doing it more than once would be horrendous.

 

[Newchodge]

In payroll terms you need to avoid paying staff weekly and monthly in the same tax month (6th to 5th of the month).

 

[pentel]

We have actually been through this process.

We offered an interest free loan to cover the maximum amount of deficit (after tax) that would happen due to being paid monthly in arrears, so in your case around £2000 per person.

We offered 3 options.

Option 1: don't take the loan. This option was taken by a surprisingly large number of people, around 50%

Option 2: pay the loan back over 6 or 12 months.

Option 3: pay the loan back from when they leave. This option was taken by around 15% of staff. One of which then asked to pay it back from wage increases / bonuses as they arose.

Of the option 3 people there are currently 2 who have not paid it back yet and will have it deducted from their final pay. This of course becomes less significant over time.

It is very important to have signed agreements for wage deductions for repayment in place before issuing loans.

 

[Employment Law Clinic]

We have four employees currently, and they may be likely to kick against this, to varying degrees.

A good starting point might be to actually speak to the staff. Are you working out solutions for problems that don’t exist, while ignoring the issues they actually have? Float your thoughts with the staff, get feedback on where they perceive issues so you can consider remedies for that.

… so then we looked at weekly loans or as and when required. But of course whatever we do, it needs to be paid back in manageable instalments.

Whatever you do, make sure your employment contracts are amended in advance of everything so that you are allowed to make “deductions from wages” for advances. Otherwise you can face questions like was it a payment an “advance”? an informal “loan”, to be paid back on unwritten terms? a “bonus”?

You’ll need to make clear what every advance is, and that it will be deducted [as in recovered] from the wages.



Karl Limpert