How to Change your Payroll Frequency

Your payroll frequency is the frequency at which you pay your employees. For example, whether you pay them every other week, on the 15^th of the month and the 30^th of the month, or every week. You may want to change this as circumstances within your business change. However, since payroll frequency affects your current employees, you want to be sure you are handling it with the utmost care.

There are a multitude of different payroll frequencies, so it may take some time to determine which is right for your business. Some of the typical pay periods are:

• Weekly – employees are paid every seven days, there are 52 pay periods per year.
• Bi-weekly – employees are paid every 14 days, there are 26 pay periods per year.
• Semi-monthly – employees are paid in the middle and end of the month, there are 24 pay periods per year.
• Every four weeks – employees are paid every 28 days, there are 13 pay periods per year.
• Monthly – employees are paid at the end of every month, there are 12 pay periods per year.
• Every 6 months – employees are paid at the end of every 6 months, there are 2 pay periods per year.
• Annually – employees are paid once per year, there is one pay period per year.

So, how do you change your payroll frequency?

The first thing to consider is the time of year which you are changing your payroll frequency. It is easiest to change this at the end of the calendar year, so your first payroll run at your new frequency will occur as the first pay run in the calendar year. This will help reduce the chance for any source deduction errors. You want to notify your employees at least one month before the frequency changes so they can be aware of how their pay will be affected.

Next, your bookkeeper will change the payroll frequency in whichever programs are used to perform payroll. Following this, you will issue a record of employment for all your employees. The Canada Revenue Agency requires that ROEs be issued any time there is a change in payroll frequency. This means you will essentially be “terminating” your employees and reactivating them with a new payroll frequency. The reason code on these ROEs will be “Other – Change in Payroll Frequency” where the last day worked is the last day of the pay cycle under the old payroll frequency.

Once you have completed ROEs for your employees, you will reactivate and reassign your employees to the new pay frequency. If your employees have a vacation accrual balance, you bookkeeper will need to double check that this has been carried over properly in your payroll software.

There are pros and cons for each payroll frequency. Such as aligning your payroll expenses with other monthly expenses in your business or saving money by running payroll less often. Whichever frequency you choose for your business should be discussed thoroughly with your financial team to ensure that all provincial and federal stipulations are followed.