Paying your employees on time is essential, especially because 62% of Americans live paycheck to paycheck. Plus, many state pay frequency requirements regulate when you pay employees. Understand payroll cutoffs to pay your team on time, every time. So, what is a “payroll cutoff?”
What is a payroll cutoff?
A payroll cutoff is the date and time you must run payroll for it to process by payday. Calculate your employees’ wages and deductions by the payroll cutoff date so employees receive their direct deposit or paycheck on payday.
Your pay frequency determines your payday and payroll cutoff. Pay frequencies include weekly, biweekly, semimonthly, and monthly periods. Your pay period length impacts how often cutoffs take place.
Payroll administrators must gather employee timesheets before the cutoff date to accurately calculate wages, taxes, and other deductions. On or before the cutoff date, verify recorded hours and run payroll so employees receive their pay on payday. Work performed after the cutoff date is part of the following pay frequency.
Payroll cutoffs are especially important if you use payroll software and pay employees via direct deposit.
Let’s say you pay employees with direct deposit each Friday. Your direct deposit has a two-day lead time, so your payroll cutoff is typically on Wednesdays. You must gather employee time cards and process payroll before the cutoff time on Wednesday.
Why do payroll cutoffs matter?
What’s so important about a date?
Running payroll by your payroll cutoff ensures you pay employees on time. Paying employees on time is essential for:
- Legal compliance: Most states have pay frequency laws determining how often you must pay employees. Missing your payroll cutoff could cause you to violate your state’s frequency requirements.
- Employee morale: Your employees rely on their paychecks to meet financial obligations. Payment delays can decrease morale and trust, increase stress, hinder productivity, and increase turnover.
- Cash flow management: Payroll is likely one of your most significant expenses. Paying employees on time helps you effectively budget and manage your business’s money.
- Employer reputation: You don’t want to be known as the employer who doesn’t pay your employees on time!
Knowing your payroll cutoff is essential for an effective payroll process. Effective payroll management impacts employee morale, legal compliance, and business operations.
How to manage your payroll cutoff
Follow payroll cutoff best practices to avoid late paydays, comply with pay frequency requirements, and keep your team happy.
Manage payroll cutoff deadlines by:
- Setting a pay frequency
- Communicating deadlines with employees
- Staying on top of bank holidays
- Using software
Here’s a closer look at how you can adhere to payroll deadlines in your business.
1. Set a pay frequency
First and foremost, you must choose your pay frequency and stick to it. Again, pay frequencies include:
- Weekly: Employees receive wages each week (52 paychecks per year)
- Biweekly: Employees receive wages every other week (26 paychecks per year)
- Semimonthly: Employees receive wages twice per month (24 paychecks per year)
- Monthly: Employees receive wages once per month (12 paychecks per year)
There isn’t a federal law that requires a certain pay frequency. However, state laws determine which pay frequencies you can choose from.
Again, your pay frequency determines how many paychecks employees receive per year. Frequency also determines how many payroll cutoffs you must mark on your calendar.
After you select your pay frequency, you can create a schedule that includes pay periods, payroll cutoff dates, and paydays.
2. Communicate deadlines with employees
Communicate deadlines with employees in advance. Your team should know important payroll dates, such as:
- When they need to turn in time cards (if applicable)
- Pay dates
Remind employees to submit their time cards. Some time and attendance software systems let you send email notifications nudging employees to submit their time cards.
Pro Tip: Give yourself time between employee deadlines and the payroll cutoff. That way, you can review time cards, make any necessary corrections, and process payroll.
3. Stay on top of non-banking days
What happens if payday falls on a bank holiday? What happens if payday falls on a weekend? Weekends and federal bank holidays, such as Memorial Day and Christmas Day, may change your payroll cutoff date, especially if you pay employees via direct deposit.
Banks are closed on weekends and federal bank holidays. They do not process direct deposits on non-banking days. So, your payroll cutoff date is earlier than normal if payday falls on a weekend or bank holiday.
Mark your calendar to avoid missing the cutoff date you need to follow to pay employees before the non-banking day.
4. Use software
Want to stay on top of your payroll responsibilities? Consider using payroll that integrates with time and attendance software.
Use time and attendance software to track time cards online. You can easily view employee time cards, nudge employees to submit cards, and reject incorrect cards. Once time cards are correct, you can approve them, send the information directly to payroll, and run payroll.
Manage your payroll cutoffs with Patriot Software
Are you looking for payroll software to streamline the way you pay your employees? With Patriot’s online software, you can manage payroll cutoffs with ease.
We support all pay frequencies so you can pay your employees weekly, biweekly, semimonthly, or monthly as needed. Plus, enjoy unlimited payrolls, free direct deposit, and free USA-based support.
Learn more about Patriot’s payroll software when you sign up for a no-obligation demo.
This is not intended as legal advice; for more information, please click here.
