We are considering changing the payroll period cut off date. Historically, we have paid our employees for time worked right up to the day payroll is made. In order to do this, we had to "estimate" 3 or 4 days of time worked on the time cards to process payroll timely.

Now, we would like to cut off the pay period date one week ahead of the pay date. Should we choose to do this, in the period we implement this, every employee will be paid for only 40 hours instead of the regular 80. Of course this causes a major cash flow problem to employees. One idea is to "loan" every employee an amount that equals 40 hours of their pay and charge them for it in the future when the quit or are terminated. Do you see any problems with doing this?

Yes, serious problems. For one thing, in most if not all states, you cannot take a deduction at the termination of employment (regardless of whether it is voluntary or involuntary) that takes the employee below minimum wage times hours worked. So you may not be able to collect the entire amount in many cases.

Patty may have some alternate solutions for you.

If you want to give a loan, then give a loan with repayment terms and have it reviewed by an attorney. It would be cheap. Make it like a promissory note. However, I've been initimately involved with this type of change in my (too many) years in payroll, and if you give enough notice, most employees can work around it and very few of them will take advantage of the offer.