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Payroll "Prepayment/Loan" California

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  • Payroll "Prepayment/Loan" California

    I am a non-exempt full-time hourly employee in California. Recently, our company was sold and the new company sent out a payroll e-mail stating: "To align our payroll schedules, we must withhold one week of pay from non-exempt (hourly) employees. We will advance you one week of pay on January 11, 2008. We will then recuperate this advancement of pay throughout the 2008 calendar year."

    On Jan 11, I received my normal two weeks of pay. However, all of my bi-monthly paychecks afterward have been deducted the amount of the "prepayment," or "loan," as it's called on my pay stub.

    The company sent out letters requiring our signatures, so they got our consent beforehand. However, my question is this: I worked the first and second weeks in January. I don't understand how the company could say it's advancing me a week's pay when I actually worked that week, let alone how they could call that advancement a loan that needs to be payed back each paycheck. Doesn't that mean I'm not being payed for a week's pay AND my paycheck's being deducted for a loan? Is this legal? It seems to me that I not only lost a week's pay, I'm being charged for it each paycheck.

    Thanks for any replies I receive -- neither I nor my fellow non-exempt employees understand this issue, and HR/payroll have failed to clearly explain why this is happening.

  • #2
    I don't get it either.

    You need to ask the company to explain how this works.

    What MAY have happened (purely a guess) is that the old company paid current and the new company paid a week later (legal). To keep you from not having a one week gap in pay, the new company "advanced" you pay and is slowly deducting the advancement until all is well. A less painful way of making the transition than having you go for a week without any pay at all.
    Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

    Comment


    • #3
      Originally posted by ScottB View Post
      I don't get it either.

      You need to ask the company to explain how this works.

      What MAY have happened (purely a guess) is that the old company paid current and the new company paid a week later (legal). To keep you from not having a one week gap in pay, the new company "advanced" you pay and is slowly deducting the advancement until all is well. A less painful way of making the transition than having you go for a week without any pay at all.
      In payroll for over 30 years now, and I'm not sure I'm clear either, although ScottB's guess is logical.

      Can you provide the following:

      1. The end of the pay period and the check date for that period immediately before the changeover
      2. The end of the first pay period and the check date for the first paycheck after the changeover

      You mentioned "bi-monthly", but I'm assuming you mean bi-weekly. Are you still being paid biweekly as before?
      Last edited by Pattymd; 02-21-2008, 02:58 AM.
      I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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      • #4
        Hi

        Thanks for your response!

        The pay periods are different for exempt and non-exempt employees. For non-exempt employees like myself, immediately preceding the changeover the pay period was Dec. 15 - Dec. 28, with the paydate on Dec. 28. Immediately following the changeover, the pay period was Dec 29-Jan 6, with the paydate on Jan 11. This was the pay date when we received our "advance." The pay period after that ran Jan 7 - Jan 20, with the paydate on Jan 25. On this paydate we received our regular pay, minus our "loan installment deduction." For exempt employees, the first pay period was the same, the second pay period was from Dec, 29 to Jan 11, with a paydate on Jan 11, and the third pay period was Jan 12 - Jan 25, with a paydate on Jan 25. I don't know if that makes a difference.

        Again, HR is not forthcoming on the issue. They merely say we were paid, and they are not in arrears to us for anything.

        Also, is it really legal for the old company to pay current and the new company to pay a week later? Doesn't that mean we work without pay for one week? That seems awfully bizarre to me. If such a thing did happen, we should have been given a week of unpaid vacation, at the very least. Someone here mentioned we'd get that lost week of pay when we quit or were fired as part of our severance package. As you can see, all of us are in the dark here.

        thanks!!!

        Comment


        • #5
          OK, they are changing from paying current to paying with a 5 day lag.

          Did the check dated 1/11 for one week's earnings have taxes withheld?
          Did the check dated 1/25 pay for only 1/7-1/20 or did it pay for 12/19-1/20?
          I'm not looking for loan "repayments" here, I'm just looking at gross pay.

          For exempt employees, they were paid three equal paychecks, each for 2 weeks' pay, each dated on the last day of the pay period (current; no lag). They didn't get an "advance", did they? They shouldn't have.

          Yes, it is legal to change from paying current to paying in arrears. If you are able to provide the answers to the above questions I think I can help. It's not impossible they've got it all wrong; but neither is it impossible that they have it right and just don't know how to explain it. The law does not provide the company the option to "lose" pay and "get it back" at termination.
          I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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          • #6
            Yes, the check dated 1/11 did have taxes withheld, but only for the non-loan half. The loan half did not have taxes withheld.

            The check dated 1/25 paid for 1/7 - 1/20.

            The exempt employees were not paid an advance.

            I think I'm starting to understand what you're saying about paying in arrears/5-day lag...I guess I just needed someone who's actually a GOOD HR person to carefully explain it to me!

            Thanks again!

            Comment


            • #7
              Originally posted by neitheornor View Post
              Also, is it really legal for the old company to pay current and the new company to pay a week later? Doesn't that mean we work without pay for one week?
              Yes, it is legal for a company to change from current to arrears. My state requires thirty day notice if we change the pay frequency, but doesn't care if we set new dates of pay with no notice.

              You are going to be paid for all of your time, just that the first week would be delayed a little which will be inconvenient at best and very bad news for some.

              Not all employees may have available PTO to cover the transition.
              Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

              Comment


              • #8
                OK, one more question on the check dated 1/11. Was the GROSS pay one week's pay or two? Can you tell me EXACTLY what the detail on the paystub looked like?
                I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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                • #9
                  Here's exactly what the paystub says:

                  Earnings
                  Regular
                  Gross Pay: One week's pay
                  Deductions: the regular tax/medical deductions, but the amounts are only for that one week.
                  Adjustment: 30 +the other week's pay (loan?)
                  Net Pay: One week's pay-deductions + the other week's pay

                  Comment


                  • #10
                    So, there is no "lost week" of earnings. You got a two-week check (current), then a one-week (arrears), then a two-week (arrears).

                    It appears what they were trying to do was soften the blow of going three weeks without a paycheck. I agree that in the net pay of the one week check, was actually nothing more than a "salary advance" which is being deducted from net pay over a period of time. The fact that the amount of the "advance" was approximately equal to what your net pay would be for one week's work, muddies the understanding, but is really irrelevant. I way I see it, you haven't missed a week of pay for time worked.

                    Now, would I have done it that way? No. But hey, I only have 30+ years experience in payroll, including nearly 15 in management. Whadda I know? And not to blow my own horn, but most HR folks I know, even the best ones and some of them are my very good friends, couldn't explain this. It's not easy.
                    Last edited by Pattymd; 02-21-2008, 10:37 AM.
                    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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                    • #11
                      PattyMD, you have been EXTREMELY helpful! Thank you so much. I finally understand what's going on here! I didn't really realize how complicated this was. That's probably why my HR people were so vague about it -- I don't think they fully understood it either, so it was enough for them to just tell me I've been paid and will be paid for the work I've done. Thank you very much!

                      Comment


                      • #12
                        Speaking as an HR person of over 25 years experience, I wouldn't even try to explain this - I'd send you to Patty (or an equally qualified payroll person).

                        There's a reason they're Payroll and we're HR.
                        Last edited by cbg; 02-21-2008, 12:43 PM.
                        The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

                        Comment

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