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What is pay group?
A pay group is a group of employees that are grouped together for payroll processing purposes. These subgroups follow specific rules in your payroll software, allowing them to be paid differently than the rest of your company's employees and/or other custom pay groups in your system.
5 examples of when payment groups are used
Pay groups typically exist in situations where employees share similar characteristics. Here are five examples of when pay groups are needed in your payroll software :
1. Payment frequency
While 43% of U.S. employers pay their employees every two weeks, you may have some employees who need to be paid weekly or monthly. It's easy for payroll professionals to group those employees together in a payroll system to ensure they get paid at the same time and no one gets missed.
2. Discount status
The Fair Labor Standards Act (FLSA) requires you to pay covered, non-exempt employees at least the federal minimum wage and 1.5 times their normal pay for any overtime hours worked. Having separate pay groups for exempt and non-exempt employees in your HR payroll system can help you stay compliant and avoid costly fines and penalties.
3. Union Membership
Union members often work under collective bargaining agreements, which employers must honor. Grouping union members together ensures that they get paid according to their contracts and keeps the company out of legal trouble .
4. Tax Status
It's important that your company deducts the correct amount of state and federal tax from every paycheck. Failure to do so could result in a compliance violation. Creating a separate payroll for tax-exempt employees can help you achieve this goal.
5. Executive Position
Executives are often highly paid, salaried employees, while the rest of the staff may receive hourly wages. Placing these executives in a separate pay group allows a responsible party to run payroll processing for people at their level and ensure compliance with relevant policies.
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