AGENDA #4

 

BUDGET WORKING PAPER

 

TO:                  W. Calvin Horton, Town Manager

 

FROM:            Kay Johnson, Finance Director

 

SUBJECT:       Discontinuation of the Weekly Payroll Option for Future Employees

 

DATE:             June 15, 2005

 

BACKGROUND

 

The Town for many years has maintained several payroll cycles for different employee and retiree groups. Our current practice requires the processing of weekly, biweekly and monthly payrolls. The determination as to pay frequency is based on job class.  The trend with other government employers is moving away from weekly payrolls and only offering biweekly, semi-monthly or monthly payrolls.  A recommendation was made by Maximus and supported by the Budget Review Advisory Committee that the Town discontinue the weekly payroll cycle and thereby offer biweekly and monthly pay only.  We have surveyed surrounding cities, towns and counties to determine pay frequencies offered.  Our findings are summarized in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISCUSSION

 

Multiple payroll processes require one full time and one part time (30 hours/week) position to prepare weekly, biweekly, and monthly payrolls. The majority of the approximately 800 positions in the system are paid on a biweekly basis, but additional effort is required to maintain separate pay cycles. The current payroll system has developed over time in response to a perceived need for certain employee groups to be paid weekly. 

 

Eliminating weekly payroll would eliminate processing of approximately 250 paychecks for 26 pay periods. This reduction would not result in a cost savings, but rather would reduce the need for an increase in staffing in the payroll office.  Minimal savings would be recognized in payroll supply costs.  In addition, this change would afford the payroll staff more time to offer other options to employees in areas such as payroll deductions that have been requested but not implemented due to time constraints.  For this reason we recommend the ultimate discontinuation of weekly payroll and offer the following options for implementation:

 

Option 1 � Gradual Phase-Out of Weekly Payroll

 

Under Option 1, those currently paid on a weekly payroll cycle would have the option of switching to biweekly payroll or continuing on the weekly payroll cycle.  All new Town employees would be required to be paid on a biweekly basis.  In addition, those existing weekly paid employees who are promoted to an exempt level (Executive, Administrative or Professional staff as determined by the Fair Labor Standards Act), or those employees promoted to a pay grade 35 or above, would be converted to the biweekly cycle.  All personnel paid on a 28-day pay cycle (i.e., fire and police personnel) would be required to be paid on a biweekly payroll cycle.  Over time this would result in a gradual phase-out of the weekly payroll cycle.

 

Option 2� Elimination of the Weekly Payroll Cycle

 

The transition from weekly to biweekly would take place in September 2005 as this is the next month with three biweekly pay dates.  In order to accomplish the transition for those moving from weekly to biweekly, the number of days would vary between the pay dates until a regular biweekly cycle is reached.  This can be accomplished during the month of September.  After this point the employees would be on a regular biweekly pay cycle.  This would ease the burden of the transition to the biweekly pay cycle.

 

We realize that the transition from being paid on a weekly basis to being paid on a biweekly basis may be difficult for some employees.  We would plan to make available to all employees sessions on personal finance and budgeting with at least three financial institutions.  The first part of these sessions would consist of an overall presentation from banking personnel on making the transition.  Following this presentation, employees who had scheduled individual appointments would be able to meet with a representative and discuss confidentially their individual situations.  They could bring in their records, such as monthly bills and information regarding other obligations, and could talk with the representative about how to make the transition to biweekly payroll work for them.  We believe that these sessions would help to relieve some of the anxiety that employees may experience when faced with making this change.

 

RECOMMENDATION

 

We recommend Option 1 - Gradual Phase-Out of Weekly Payroll; however, we wanted to offer an additional option of elimination of the weekly payroll cycle in case this option is preferred.