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Employer X used to pay salary on the 15th and last day of the month. Their accounting department now changed this to a 7 day lag pay system. The payroll department argues they will transition to a new electronic time keeping system and therefore pay dates would need to be changed for real-time processing of the payroll.

In reality, this means that 1 week worth of salary is withheld for 1 week. Is this common practice? What happens with the money the employer keeps for a week?

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  • Why don't you ask your HR department? – joeqwerty Feb 21 at 23:31
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    “In reality, this means that 1 week worth of salary is withheld for 1 week. Is this common practice?” - It common to have pay delayed by a week once, debatable, but being paid a week after your time card is due is extremely common. Every federal employee in the US is paid bi-weekly, their time card is by the end of the 2nd week (adjusted for holidays) and is processed the next week by HR allowing employees to be paid by that Friday. (USPS has a slightly different pay system). At the end of the day, your paid bi-weekly, you basically work for without pay the first 3 weeks of your career – Donald Feb 22 at 2:30
  • Unfortunately it is quite common! – Fattie Feb 22 at 13:23
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I went through this back in the 1990's. We were paid every two weeks, but payday was on the last day of the pay period, the very same day you submitted your (paper) time card. It was great for the employee because there was no lag. From the company standpoint it was a pain. They would have to adjust their accounting because they wouldn't know how much vacation, or sick, you took until after payday. If you worked multiple projects they couldn't assign your hours until after payday.

When they decided to go to a more normal pay system where payday was a week after the end of the pay period, there were a lot of people upset. It meant that they had one check where they had to wait an extra week. For people living check-to-check that was a problem.

The company did several things to make it easier:

  • They gave several months notice.
  • They made sure it wouldn't change the number of checks in the year; which would have impacted 401(k), Flexible spending accounts, and insurance premiums.
  • They allowed people the option of getting three weeks of pay in the first check after the switch, but then reduced the next 10 checks by 4 hours of time. Essentially they gave them an interest free loan to be paid over about 5 months.

The company argued they would save overhead because of less effort to adjust their accounting. It also conformed with how billing the government contracts had to work.

I don't think the company makes a lot of money off of holding pay for a week. Unless there is a law that mandates the check be generated sooner, I think a week lag is normal.

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    And, when you leave the job, that is when that last week is fully paid. So you do end up with all the pay owed. – thursdaysgeek Feb 22 at 17:15
  • I once had an employer move from a Mon-Sun work week to a Sun-Sat week, which would have meant a day's pay shaved off for people who worked weekends (which would have been recovered someday in the future on their last paycheck). After a bit of an outcry from many of the hourly employees, they just gave an extra day's pay as a bonus. – Ask About Monica Feb 22 at 19:06
  • My company did something similar, but also went from weekly paychecks to biweekly paychecks at the same time. A bit of a kerfluffle, but they eased the impacts for those that requested/needed it. And it allowed continuing to direct deposit pay on Thursday, while timecards run noon-Friday to noon-Friday (enabling a 9/80 workweek for hourly employees). – Jon Custer Feb 23 at 17:31
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My salary is paid with a 1 month lag, ie the pay in February is based on the sickness, overtime, holiday & any absences for January.

This means that when I leave the last payment brings it all up to date.

This allows payroll or accounting to have all the relevant info to be collated and reduces the number of corrections - but there are always a few which get adjusted in the following pay period.

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