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Payroll in Arrears

Posted by HomeWork Solutions on 7/25/23 11:11 AM
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Being paid in arrears is a payroll term unfamiliar to many new household employers. It is the most common way employees in other industries are paid, and for a very good reason, as it minimizes the likelihood of corrections needing to be made later.  

When paying in arrears, the pay period generally ends approximately one week before payday. If an employee works overtime, takes a sick day, or needs to leave work early during the pay period, the deviation in the regular schedule is known prior to the calculation of wages due.  As a result, there is no need to adjust payroll calculations done in advance, or to "true-up" a leave balance.  Employees are simply paid for the hours they worked and for the paid leave they used in the given pay period.

In the modern world of electronic banking, more and more household employers are moving to payment in arrears, as it allows employers to provide their employees with direct deposit without moving funds until after the work has been completed. Direct deposit is convenient for the employer as there is no need to print, mail, or hand out checks. It is also convenient for the employee, who does not have to make a trip to the bank and can still receive funds when traveling or is otherwise unable to collect a paper check.

To give a calendar example of payroll ins arrears, let's look at an employee being paid weekly for work from Saturday, January 14th through Friday, January 20th. The employer would report the hours worked to their payroll provider on Friday, January 20th. The employee would receive their payment by direct deposit a week later, on Friday, January 27th.

Many employers choose this method of payroll because it gives them time to factor in calculations like PTO, sick days, or overtime. It is a more accurate way to pay, and it prevents the rush to process the payment which could cause stress or inaccurate payment. 

If you have recently hired a household employee and you want to ensure you have your payroll and tax information set up to be filed accurately and on time, our experienced team at HomeWork Solutions can help. Contact us today at 1-800-626-4829 or info@homeworksolutions.com.

Topics: nanny, agency, senior, CPA

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