How Can I Shift My Pay Calendar to the 25th Without Shortchanging Employees?

Hello, I want to change my current salary payment calendar from the 1st to the 30th or 31st of each month to the 25th day of each month while still maintaining the 30/31 days cycle.

How do I approach this in the first month?
Do I pay from the 1st to the 25th in the first month, which will reduce the salaries? If I pay for 30 days on the 25th in the first month and someone resigns without notice, I will be cheated too. However, if nobody resigns, all absenteeism can be addressed in the next pay calendar.

I would really appreciate some advice. Thanks.

Salary Period Adjustment

The salary period should span 30 or 31 days. You can adjust the cycle from the 26th to the 25th for ease in salary computation and disbursement on the 31st or 1st of the month. When making this change, for the initial month, consider the employees' attendance from the 1st to the 25th and pay the salary for the entire month (30 or 31 days), assuming no absences without leave. Any leave taken after the 25th will be accounted for in the following month.

Handling Resignations and Absences

In the case of a Loss of Pay (LOP) reported by an employee who has submitted their resignation, withhold their salary and include it in the Full and Final settlement. There is a rare possibility that an employee might be absent from the 26th to the 31st, receive the salary for the full 31 days, and then leave the company. If this scenario is anticipated, also withhold such an employee's salary until their return and provision of valid reasons for their absence from the 26th to the 31st.

Hi Frances, Attendance/leave management system is an internal matter. You may modify this as per your convenience and organizational capabilities. However, wage payment is an enacted responsibility tied up with various norms of government statutory agencies (e.g., PF, ESI, LWF, Income tax, gratuity, etc.), which have to follow the calendar month/year only. You may continue making "adjustments" but ultimately towards the end of the calendar year/financial year/exit of the employee, you'll have to "square off" the adjustments. So take a judicious view of the situation and act accordingly.

@Madhu, thanks so much for your feedback. So, if I understand you correctly, I can pay them from the 1st to the 25th in the first month with prorata?

No, for the first month, you should pay for 30/31 days, not pro rata up to the 25th. When you pay for 30/31 days, the risk is what I have mentioned, and that should be taken care of. But if you pay pro rata for 25 days, next month you will be paying for the 26th to the 25th (for one month), but the wage month cannot be the same, i.e., September, but it will be Aug-Sept. This may cause trouble when you prepare your ESI and PF returns. Therefore, make it wage month-wise itself like Aug, Sept. The only thing is that for this month, i.e., the first month, you have to pay the salary on the assumption that no one will be absent without leave after the 25th.