Wednesday, March 31, 2010

Payroll change can save Money!!

Recently, the City Council was informed that an additional payroll was made in 2009 because of using a bi-weekly (26 payment) payroll system. This additional 27th bi-weekly payroll is an anomaly that occurs every 11 years because our bi-weekly payroll it is based on a 364 (52 week) year versus the reality of a 366 on leap year and 365 normal year. The extra 1 or 2 days(leap yr) add up to an extra payroll on the 11th year.

What this all means is that an annual salary's that we voted on in our budget (look at page 7-10 of this personnel summary) was altered by this extra week . My understanding is the proper salaries were paid in the first 26 payments. Problem is that we had 27 in 2009.

The remedy to this problem is to do what the State of Illinois and many other large corporations do. That is to change to a twice a month(semi-monthly) payroll system that is based on a full year and never has anomalies like this one. The switch not only saves us the salary in the extra payroll every 11 years, but also saves us the cost of having two extra payroll periods every year (24 vs 26).

It is amazing to me that this is the first we have heard of this extra cost since it is accumulated every year. We have been struggling with getting our revenues to match expenditures and this adjustment can fill a big hole since we are talking about hundreds of thousands. I don't know about you but anywhere we can cut costs without reducing services or laying off employees I Say Yes!!