Understanding Off-Cycle Payroll: When and Why to Run It

There are several scenarios in which running an off-cycle payroll might be necessary, keep reading to learn more!

In payroll management, the primary goal is to ensure employees are paid accurately and on time. While regular payroll runs are scheduled at consistent intervals, there are instances when you might need to process payroll outside of these regular cycles. This is known as off-cycle payroll. This article will help you understand what an off-cycle payroll is, when it might be necessary, and the benefits of running it.

What is Off-Cycle Payroll?

Off-cycle payroll refers to any payroll run that occurs outside of the standard payroll schedule. This could be an additional payroll run that is not part of your regular bi-weekly, semi-monthly, or monthly payroll cycle. Off-cycle payroll runs are typically used to address specific situations that require immediate payment to employees.

Common Reasons to Run Off-Cycle Payroll

There are several scenarios in which running an off-cycle payroll might be necessary:

1. Correcting Payroll Errors

Mistakes can happen during payroll processing, such as incorrect wage calculations, missed hours, or wrong deductions. If an error is discovered after the regular payroll has been processed, an off-cycle payroll run can correct these mistakes promptly.

• Example: An employee's overtime hours were not included in the regular payroll run. To rectify this, you can process an off-cycle payroll to pay the employee the additional wages owed.

2. Termination Payments

When an employee leaves the company, either voluntarily or involuntarily, they may be entitled to final payments, including accrued vacation time, severance pay, or other owed compensation. Depending on your state or company policy, these payments might need to be made immediately, necessitating an off-cycle payroll run.

• Example: An employee resigns and is entitled to their final paycheck within 24 hours. An off-cycle payroll run ensures they receive their final payment on time.

3. Bonus Payments

Occasionally, companies may decide to issue bonus payments outside of the regular payroll schedule. This could include performance bonuses, holiday bonuses, or special incentive payouts.

• Example: The company decides to reward employees with a year-end bonus. Rather than waiting for the next regular payroll run, an off-cycle payroll is processed to distribute the bonuses promptly.

4. Adjusting for Tax Errors

If there are discrepancies in tax withholdings or contributions, correcting these errors promptly can prevent further complications and ensure compliance with tax regulations.

• Example: An incorrect tax rate was applied to an employee's wages. An off-cycle payroll run can adjust the tax withholdings accurately and avoid potential penalties.

5. Employee Reimbursements

Sometimes, employees might incur business-related expenses that need to be reimbursed outside of the regular payroll cycle. Running an off-cycle payroll allows for timely reimbursement.

• Example: An employee submits a reimbursement request for travel expenses. Rather than waiting for the next payroll cycle, an off-cycle payroll can be processed to reimburse the employee quickly.

6. Payroll Adjustments Due to Legal Requirements

Certain legal or regulatory requirements may necessitate immediate payroll adjustments, such as compliance with a court order for wage garnishments or settlements.

• Example: A court order mandates immediate wage garnishment for an employee's child support payments. An off-cycle payroll run ensures compliance with the court order.

Benefits of Running Off-Cycle Payroll

Running off-cycle payroll can offer several benefits, including:

• Timely Corrections: Quickly addressing payroll errors helps maintain employee trust and satisfaction.
• Legal Compliance: Ensures compliance with state and federal labor laws regarding timely payment of wages.
• Employee Morale: Promptly addressing issues like reimbursements or bonuses can boost employee morale and engagement.
• Flexibility: Provides the flexibility to manage unexpected payroll situations efficiently.

Best Practices for Running Off-Cycle Payroll

To ensure smooth and accurate off-cycle payroll runs, consider the following best practices:

• Use GoCo's off-cycle payroll feature to adjust calculations and reduce errors. (See the How-To Guide Below)
• Communicate Clearly: Inform affected employees about the off-cycle payroll run and explain the reasons behind it.
• Keep Detailed Records: Maintain thorough records of all off-cycle payroll runs for auditing and compliance purposes.
• Review Policies: Regularly review your company's payroll policies to ensure they accommodate off-cycle payroll needs.

💚 If you have any questions, please reach out to support@goco.io

Published 5.22.24