Confused About Changing Salary Processing Dates? Need Advice on Handling This Shift

Salary Processing Period Change

In our company, we have a salary processing period from the 1st to the 30th/31st of the month. Now, we are going to change this period, and I have been asked to process the salary from the 26th of the previous month to the 26th of the current month. The salary for the month of April '13 (period - 1st to 30th April '13) has already been processed. Therefore, I believe that for this May '13 month, the salary should be processed from the 1st of May to the 25th of May '13. Subsequently, in the following months, we may consider processing salaries in a 26th - 25th period pattern.

However, one of the seniors is saying that we cannot process the salary for 25 days. Can somebody clarify what should be done here so that the salary can be processed timely for all the employees?

Please reply now. Thank you.

Regards

Yes, you cannot process for 25 days. However, the salary period is for the sake of leave, attendance, working, and convenience of the payroll processor.

For any statutory and accounting purposes, you need to follow calendar months and the financial year, right?

You will have to process the salary for 25 days if you have to regularize as per the new payroll schedule. For the convenience of employees, maybe 5 days' salary can be processed as an advance and adjusted in the next month's salary. This will avert a negative reaction from employees for being given less salary.

Hope this helps.

Regards,
Gia

I believe it's not that they have asked you to process salary for 25 days, which is not possible. They must have instructed you to consider the 25th of every month as the cut-off date for processing salary, ensuring that the salary will be credited on time.

For example, the May month's salary would cover the period from April 26th to May 25th.

Thank you,

Devaki Reddy

Dear Vishal, your senior is right; you can't give an employee salary for 25 days for having worked for one month in order to change your system of payment. It will be incorrect and unjustified. I agree with our member Sh. Gia that for the first month of changeover, 5 days' salary can be processed as an advance and adjusted in the next month's salary. Another way is that you pay the employees 25 days' salary on the 26th of the first month, mentioning to them clearly that the salary is calculated in this way to facilitate the change of the payment system.

Regards,
BS Kalsi
Member since Aug 2011

Hi Vishal, the first thing to check is whether you have tagged any particular reason for this change. Is this planned for retention, or kind of...? You need to pay the salary for the work performed by an employee according to the law. Can you please let me know when your pay date is? This information would bring more clarity to the case, which would help in providing better comments and suggestions.

Thank you.

What we do in our organization is we take the cut-off as the 25th of every month, but the salary is processed for the whole month. We consider the person to be present from the 25th to the 30th/31st of the month. In case he/she takes leaves between the 25th and the 30th/31st of the month, the same is adjusted in the next month's salary. In reality, the 25th is just the cut-off date for the salary to get processed on time.

Regards,
Bhavana

I am working in Dubai, and the cut-off date in our company is the 25th. However, we pay 5 days in advance. If anyone is absent during the last 5 days, we deduct those days from their upcoming salary. This deduction is mentioned in the payroll adjustment for the last month's salary.

Thank you.

We have the process of calculating the salary from the 26th to the 25th of the current month. We get the salary for the entire 30/31 days, which is for the month. Even while you are doing the attendance from the 1st to the 25th of this month, you will have to give the salary for the entire 30 days only. Five days will be an adjustment.

Attendance Cycle and Salary Processing Clarification

In our company, the attendance cycle is from the 20th to the 20th. In this case, we process 10 days' salary without checking the attendance. However, in the following month, attendance for these 10 days is verified. If there are any instances of Leave Without Pay (LWP), the corresponding deductions will be made in the next month's salary. If employees inquire, inform them that we processed the full month's salary for the previous month regardless of any LWP, deducting it in the current month since we only checked 20 days of attendance from the last month.

Hope this clarification helps you.

Regards,
Jaykant Singh

If you planned for the salary period calculation from the 26th to the 25th, then you need to reschedule your system or software. I believe it's a better way as after the 26th, you have a few days to manage leave, resulting in the final salary calculation.

Actually, there is no law preventing you from paying a salary for 25 days, as long as it is clear that the salary period is for 25 days. The Payment of Wages Act provides that the salary period cannot exceed one month. It allows for a lesser period, such as weekly and fortnightly.

However, you are likely to have a problem with the statutory dues, as these are computed and verified on a calendar month basis. So, it is not a good idea to change the wage period to the 25th of the month. Instead, what you can do is use that as a cut-off for salary computation.

With the current level of automation options available, you do not need more than three days to complete payroll. Therefore, the entire rationale of switching to a 25th cut-off no longer applies. Giving salary on the last day of the month also has no real rationale. After the first month, the impact no longer holds.

Salary Processing on the 26th

If you have to process the salary on the 26th, you may process the salary for 5 or 6 days in advance based on assumption. In the following month, you can settle the arrears for those 5 or 6 days.

Regards.

Presently, we process salary from the 1st of the month to the last date of the month. We are now planning to change this process to run from the 26th of the current month to the 25th of the following month so that employees can receive their salaries on the 1st of every month. Currently, they typically receive their salaries by the 7th of each month.

I appreciate all the ideas shared here, especially Gianim23's. Ms. Bhavana, could you please elaborate on your concept? I didn’t fully understand what you shared earlier. One of the seniors also conveyed his ideas in a similar manner to what you mentioned. I am looking forward to your response on this.

Thank you.

I concur with Ms. Bhavana's suggestion. We are doing the same. The 26th to 25th is only the cut-off date for attendance.

Regards,
Kumar

Can you let us know what your purpose is for changing the existing system? Based on my experience, what you are currently following is far better than what you are planning. You will be paying the employees considering that they will be present for the next 4 or 5 days. For example, if someone has absconded and is not coming to duty, it will become your responsibility to handle the recovery process. I have been through this cycle, and it is tough.

Regards.

As per your question, I bring to your kind notice that some organizations follow attendance for the period 26th to 26th (as an internal adjustment), which is the so-called cut-off date (five days before the closing month). However, there is no problem for you in preparing the Attendance Statement because the period calculation would be the same.

Regards,
RAGHU

Dear Mr. Vishal, 26th to 25th is the attendance cut-off date, and salary will be paid for the period 1st to 30th/31st of the month. It is said to be assumed salary. For example, for the April '13 salary, attendance and OT inputs are collected for the period 26th Mar to 25th April '13. Salary will be processed for 1st to 30th of April '13 and credited to employees on 30th April '13 or 1st of the consecutive month.

Regards, Kumar

Understood the concept properly. I am going to manage salary processing work as per the suggestions given by all of you. Thanks a lot for your timely help.

Regards,