Executive Summary:
- Transitioning from a weekly to a biweekly pay cycle during an acquisition necessitates early planning and transparent communication.
- Minimizing employee financial disruption is key, meaning frequent communication and training are a must.
- After the integration is complete, you should verify things like benefit deductions and overtime calculations are still correct.
- Soliciting feedback once the process is complete can help smooth over any wrinkles that may be left over at the end of the process.
Let’s talk about acquisitions. This can be both a very exciting and a very stressful time for both businesses involved. To say that there’s a large number of things to consider and go over during an acquisition would be a bit of an understatement. One aspect that can often be overlooked is payroll. But payroll should be one of the most important things to discuss as soon as possible once the acquisition process has started, especially if you’ll be transitioning pay cycles. If not, you risk creating unnecessary stress down the line, as well as creating unnecessary confusion for you and your employees.
At Payday HCM, we’re very familiar with the stress involved in an acquisition as well as the importance of discussing payroll in the early stages of the process. We frequently receive questions from business owners about what the best practices during an acquisition are and when the best time to start thinking about payroll is. Well, the short answer is as soon as possible, but the long answer is a bit more complicated.
So, in this article, we’ll be breaking down some best practices for transitioning employees from a weekly to biweekly pay cycle during an acquisition. We’ll cover four different points of the process and what they look like in terms of planning for this transition, including:
- The Planning Stage
- Minimizing Employee Financial Disruption
- After the Acquisition: The Review Process
- Training and Post-Acquisition Feedback
#1: The Planning Stage
First up is planning. Any good transition requires a lot of forward thinking, and transitioning between pay cycles during an acquisition is no different.
Start Planning Early
Planning for the integration of the two businesses’ payrolls should begin as soon as possible. A payroll integration team should include representatives from payroll, human resources, finance, legal and compliance, benefits administration, and HRIS or IT. Even if either business doesn’t have these exact departments, the team should still include representatives from across both businesses.
The team should develop a detailed transition plan that addresses the first payroll under the new employer, timing of the final payroll for the business being acquired, mapping of pay periods, system conversions, tax and benefit implications, employee communications, and state-specific payroll regulations.
The plan should also include a timeline that covers the last weekly pay period, last weekly paycheck, any partial pay periods, first bi-weekly pay period, first bi-weekly paycheck, timekeeping deadlines, and payroll processing dates. The transition should be structured to avoid missed wages, duplicate payments, delayed payments, or overlapping pay periods.
Review State Wage Payment Laws
Before actually enacting any changes to pay frequency, employers should double-check they’ll still be in compliance with applicable wage payment laws. Some states require employee notification before changing payroll frequency, restrict how often certain employee groups may be paid, or impose additional requirements when an employer moves employees to a less frequent pay schedule.
Employers should review wage payment frequency requirements, final paycheck rules, collective bargaining agreements, employment contracts, offer letters, and union obligations. In addition, you’ll want to verify that any remote or hybrid employees will still be meeting any local wage laws or requirements that may apply to them.
#2: Minimizing Employee Financial Disruption
Second up is ensuring that the acquisition causes as little disruption to the financials of employees of both companies as possible.
Concerns During the Acquisition
The greatest concern for employees is often not necessarily how much they will be paid, but when they will receive their pay. Employees moving from weekly to bi-weekly payroll may experience a longer gap before their first paycheck under the new schedule. HR and payroll teams should identify this potential gap well in advance and determine whether transitional measures are appropriate.
Depending on the organization's policies and applicable laws, employers may consider transition advances, short-term payroll assistance, earned wage access programs, emergency assistance resources, or other options designed to reduce financial hardship. Providing financial planning resources can also help employees prepare for the new pay cycle.
Communicate Early and Often
Many employees initially assume that moving from weekly to bi-weekly payroll means they are receiving a pay reduction. Communication should emphasize that the employee's hourly rate or annual salary is not being reduced simply because the pay frequency is changing. The key difference is that employees will receive fewer, larger paychecks throughout the year.
Using side-by-side paycheck examples can be one of the most effective ways to demonstrate the change. For example, an employee accustomed to receiving 52 weekly paychecks will generally move to 26 bi-weekly paychecks. Their annual compensation remains the same, but each individual paycheck will be larger because it represents two weeks of earnings instead of one.
Communication should occur through multiple channels, including leadership announcements, HR emails, FAQs, manager talking points, employee meetings, payroll webinars, and intranet resources. Transparency reduces uncertainty and helps establish trust with employees during an already significant period of organizational change.
Communications should answer common questions such as why payroll is changing, when the change will occur, when the final weekly paycheck will be issued, when the first bi-weekly paycheck will be issued, whether tax withholding will change, how overtime will be handled, whether benefit deductions will change, and who employees should contact with questions.
#3: After the Acquisition: The Review Process
Once the acquisition is nearing completion and the process of integrating the two businesses’ payrolls is almost finished, it’s time to review some key components.
Double-Check Benefits Deductions and Payroll System Configuration
Benefit deductions require particular attention when changing pay frequency. An employee who previously received 52 paychecks per year may have had benefit premiums and other deductions spread across those 52 checks. Under a bi-weekly schedule, those same annual deductions may instead be spread across 26 checks.
Employers should review medical, dental, vision, FSA, HSA, life insurance, disability insurance, retirement contributions, and applicable wage garnishments. Employees should receive advance notice explaining how their deductions will appear under the new payroll schedule. HR should also confirm that annual contribution limits and plan rules are properly reflected in the new payroll configuration.
Payroll systems must also be thoroughly tested before the completion of the acquisition. Testing should verify earnings calculations, overtime calculations, shift differentials, PTO accruals, benefit deductions, tax withholding, garnishments, direct deposit, general ledger postings, and payroll reporting.
Reviewing Timekeeping Processes and Overtime
Weekly payrolls often operate with different timekeeping submission and approval deadlines than bi-weekly payrolls. Organizations should update timekeeping deadlines, train supervisors on new approval schedules, validate overtime approval workflows, and ensure timecards align with the new payroll calendar.
Employees and managers should understand exactly when hours must be submitted and approved. Clear deadlines reduce payroll corrections and last-minute adjustments after go-live. In addition, moving from weekly to bi-weekly payroll does not change how overtime must be calculated under federal law.
For nonexempt employees covered by the Fair Labor Standards Act (FLSA), overtime generally must be determined based on hours worked during each individual workweek. Payroll systems should therefore continue to calculate overtime separately for each workweek, even when two workweeks are combined into a single bi-weekly paycheck.
#4: Training and Post-Acquisition Feedback
A new pay cycle and new payroll system will come with new processes. Training and feedback will be essential to ensure all processes continue to run smoothly.
Training Managers and Employees
Managers are often the first people employees approach with payroll questions. Managers should receive payroll calendars, FAQs, communication guides, escalation contacts, and sample employee questions. They do not need to become payroll experts, but they should understand the basic mechanics of the change and know where to direct questions they cannot answer.
Once the payroll integration process is nearing completion, in-person training sessions should be held not only to ensure employees understand any new systems or procedures, but also as a forum to ask any questions or raise any concerns they may have. These sessions should also be made available virtually.
Monitoring and Gathering Feedback
The first payroll under the new schedule should receive heightened attention from the payroll and HR teams. Organizations should establish a dedicated process for quickly resolving issues involving missing hours, incorrect deductions, tax withholding questions, direct deposit problems, benefit discrepancies, or overtime calculations.
After the first one or two bi-weekly payroll cycles, the organization should conduct a formal review. The team should evaluate payroll accuracy, employee inquiries, system issues, timekeeping problems, benefit deduction discrepancies, and recurring questions. Lessons learned should be documented and incorporated into future acquisition integration processes.
Make Your Acquisition a Seamless Process
An acquisition can be an enormously exciting process, but, just as easily, it can also be an extraordinarily stressful and time-consuming one. While there are many aspects to consider when going through an acquisition, payroll is one of the more important—even still, it’s something that can continually get pushed to the side until it’s too late. If you’re acquiring a company, or if your company is being acquired, it’s crucial to outline as soon as possible the transition process between one pay cycle and another. Communicating this transition with employees of both companies is also crucial. Luckily, with the information provided here in this article, you’ll have the knowledge you need to help make the transition as smooth as possible.
Determining when your employees get paid is almost as important as determining how much they’ll get paid. Whether you opt for weekly, biweekly, semimonthly, or another arrangement, it’s crucial to ensure that your business’s pay cycle is clearly communicated to your employees. But how do you determine which pay cycle to go with? Are there ones that best fit certain types of businesses? Check out our article on biweekly versus weekly versus semi-monthly to find out which pay cycle is best for your business.
Frequently Asked Questions (FAQs)
Q: If we move employees from weekly to biweekly pay, are we cutting their pay?
No — their hourly rate or annual salary doesn't change, only the frequency of paychecks does. An employee who received 52 weekly paychecks will typically move to 26 biweekly paychecks; each check is larger because it now covers two weeks of earnings instead of one. Side-by-side paycheck examples are one of the most effective ways to demonstrate this to employees who assume it's a pay cut.
Q: Does switching from weekly to biweekly pay change how overtime is calculated?
No. Under the FLSA, overtime for nonexempt employees must still be calculated based on hours worked in each individual workweek, even once two workweeks are combined into a single biweekly paycheck. Your payroll system needs to keep calculating overtime separately per workweek rather than averaging or combining hours across the full pay period.
Q: What should we double-check with benefit deductions when changing pay frequency?
Since annual deductions previously spread across 52 paychecks will now spread across 26, review medical, dental, vision, FSA, HSA, life insurance, disability, retirement contributions, and any wage garnishments to confirm they're recalculated correctly under the new schedule. Employees should get advance notice of how their deduction amounts will look on each check, and HR should confirm annual contribution limits and plan rules are set up properly in the new payroll configuration. (original)