I work at a company that pays their employees every other Friday. In other words, paychecks are distributed every 14 days, ending on Friday.
Upon being hired, I was told that I will make $300 every two weeks. (I am a part-time student employee, which is why my salary is so low). In fact, for the first year, I was paid exactly $300 every two weeks. However, in the past month I noticed that my gross pay had decreased from $300 to $276.92. I contacted payroll about this, and they gave me the following response:
Salaries are calculated according to the following formula: G=(P*2*12)/26, where "G" is your gross pay, and "P" is your two-week salary." In my case, "P" is $300.
I interpreted their formula as this:
- If I make "P" ($300) every two weeks, and we assume that there are two paychecks per month, then my monthly salary is P*2 = $600.
- If there are 12 months in one year, and I make P*2 every month, then my yearly salary is (P*2)*12 = $7200.
- If there are 52 weeks in one year, and we are paid every two weeks, then my biweekly paycheck should be my yearly salary divided by 26, or ((P*2)*12)/26 = $276.92
The problem I am having with this though, is that the first bullet assumes we are paid two times per month, when in fact we are paid every 14 days. This means that for months with 31 days, I don't receive two paychecks, but I actually should receive 2.21 paychecks. Similarly, for months with 30 days, I should receive 2.14 paychecks, and for months with 28 days, I should receive 2.00 paychecks.
If my reasoning is correct, I come up with the following conclusion:
- There are 7 months with 31 days, 4 months with 30 days, and 1 month with 28 days.
- The number of paychecks I should receive in one year is equal to: 7*2.21 + 4*2.14 + 1*2.00 = ~26
- However, payroll's assumption seems to be that we receive exactly 2.00 paychecks each month, which comes out to 12*2 = 24 paychecks per year.
- In conclusion, I am now losing two paychecks each year, or in my case, I am making $600 less per year.
Can anyone comment on this? I would like to meet with my payroll department, but I want opinions on if my reasoning is sound or not first.
Perhaps some of my confusion stems from my inexperience/ignorance. I have always been under the impression that people who are paid "semi-monthly" (twice per month) typically get paid on the 15th of each month and the last day of each month. And, for example, their pay stubs would show: "Pay Period: Aug. 1 - Aug. 15" and "Pay Period: Aug. 16 - Aug. 30".
However, my pay stubs say things like: "Pay Period: Aug. 24 - Sept. 6" and "Pay Period: Sept. 7 - Sept. 20"
I guess it doesn't make sense (to me) that I would be paid "semi-monthly," yet my pay periods are spanning across the middle of months. Is this possible?