1. Proposed Implementation of Bi-Weekly PayrollREPORT TO:
FROM:
SUBJECT:
City of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758
Honorable Mayor and City Council
Chris A. Kukulski, City Manager
Implementation of a Bi-Weekly Payroll
MEETING DATE: August 13, 2001
BACK GROUND: For the past several years the City has struggled with its payroll system. I have asked
Robert Denning of Denning, Downey & Associates, P.C. to assist me in this regard. Attached is a letter from
Mr. Denning outlining his analysis, findings and recommendation for improvement. You will see from this
letter that there are a number of efficiencies that can be gained by changing to a bi-weekly payroll, not the
least of which is a clean and simple payroll system that can be completed in a matter of hours rather than
days.
Also attached is a letter and calender which will be given to the AFSCME Union President notifying him of
this upcoming change.
RECOMMENDATION: The City Council concur with the proposed bi-weekly payroll change.
FISCAL EFFECTS: We currently pre -pay employees through the end of each month. This proposal
includes a one time pre -payment which helps the employees equitably deal with this change and also gets the
City out of the pre -payment business in the future.
ALTERNATIVES: As suggested by the Council.
Res�p�e�ctfuullly submitted,
(I�.
Chris A. Kukulski
City Manager
Report compiled August 9, 2001
Page i of i
RECEIVED
Denning, Downey & Associates, Pz1rAUG -4 PM 2: 35
CERTIFIED PUBLIC ACCOUNTANTS
1740 Hwy 93 South •Kalispell, MT 59901 F(ALISPELL CITY CLERK
(406) 756-6879 • FAX (406) 257 7879 • E-Mail ddaudit@centurytel.net
Kim M. Downey, CPA, CGFM
Robert K. Denning, CPA, CGFM
Beau E. Perkins, CPA
Jessica Connolly
August 1, 2001
City of Kalispell
Attn: Chris Kukulcki City Manages
312 1 n Avenue
Kalispell, MT. 59903
RE: Payroll
Dear Chris,
This letter summarizes the research I've done regarding the payroll for the City of Kalispell. Your staff and
myself have put a lot of effort into coming up with a payroll plan that meets your requirements of
minimizing any cash flow effects to the employees while increasing the efficiency of your system.
Summary of the Payroll Systems Currently in use:
- Police Officers
The police officers union contract indicates their work period as 80 hours in 14 consecutive days. For
scheduling purposes they have chosen a Sunday through Saturday work period. The employees prepare a
14 day timecard that matches their work period and the pay cycle is every 14 days.
- Fireman
By union contract the fireman's work period is 168 hours in 27 consecutive days. They prepare a monthly
timecard showing hours from the 21" of the previous month to the 20'" of the current month. They are
paid on the 25'" of each month, for the entire month. Their pay is advanced to them from the 21" to the last
day of the month and any adjustments for sick, or vacation time and overtime are made up the following
month.
- Salaried_Em In ovees
The majority of the salaried employees are actually hourly employees under the Fair Labor Standards Act
(FLSA) and their wages are annualized to come up with equal monthly paychecks. Most of these
employees are paid on a 7 day work week, the work week is defined by union contract and the personnel
policy handbook as Monday through Sunday. A monthly timecard is prepared showing hours from the 21"
of the previous month to the 20th of the current month. They are paid on the 25 " of each month for the
entire month. Their pay is advanced to them from the 21" to the last day of the month and any adjustments
for sick, or vacation time and overtime are made up the following month.
- Hourly Employees
Hourly employees are broken into two categories, those hired prior to 5/1/01 and those after 511101.
Prior 511/01 employees are paid on a Monday through Sunday seven day work week. They
prepare a timecard showing hours from the 21" of the previous month to the 20" of the
current month. They are paid on the 25" of the month for hours shown on their timecard.
Post 511101 employees are paid in the same manner as the police officers except overtime is
computed on a 40 hour seven day week.
Summary of design inefficiencies in the current payroll system:
- Four different systems
Having four different payroll systems creates more work for the payroll clerk.
- Prepaid Salaries
Firemen and salaried employees are paid on the 25ih of each month for work to be performed by the
end of the month.
- Calculation of Sick. Vacation and Overtime
For the firemen, hourly and salaried employees the payroll clerk must review the prior month's
timesheet and manually make any corrections since the timesheets do not match the payroll period.
Recommendations:
As per your request that we minimize any short-term cash flow on employees we have drafted the
following recommended changes:
- Payroll period
We recommend that the City change their pa)roli cycle for hourly and salaried employees to a 14 day
payroll period ending Saturday night.
- Draws
Since all employees are paid every two weeks we recommend that employee draws be eliminated.
Change over period
When paying every 14 days there are 26 payroll cycles in a year. Ten months have two paydays and
two months have three paydays. We recommend the first 14 day cycle begin on Sunday December 2nd
and end on Saturday December 15d', 2001. This period was chosen for the following reasons:
- It gives employees advance notice for adjustment
- It coincides with the police officers payroll cycle.
- When combined with the option for an advance (see below), and that January 2002 is the next
month with three payroll periods it minimizes any cash flow effect to the employees.
The First Payroll
The first payroll period would be from December 2nd to December 15th and the first payday would
be on December 20th.
Advances
Since the December 20th paycheck for salaried employees will only include 14 days instead of the
normal 30.4 days, this paycheck will only be about 46% of what they are used to receiving. We
recommend that these employees be offered on December 10°i a one-time advance on their future
paychecks equal to their take home pay for a 14 day payroll period.
The following questions have risen as a result of changing to a 14 day payroll period.
What cash flow impact would this have on the employees9
December — Employees that usually receive their paycheck on the 25'" of the month for a full
month would receive two checks for the month of December (Paycheck on the 20' and an advance on
the l Od') combined the checks would amount to approximately 92% of their previous monthly payroll.
January — As noted earlier when payroll is paid every 14 days it results in 26 pay periods during
the year. The month of January is one of the months in which three paydays fall. Therefore the
employee would receive 138% of their previous monthly payroll. Months with two paydays will
average approximates 92% of their previous monthly payroll.
How is the one-time advance you are proposing different from the current prepaid methods
Employees that are currently paid on the 25' are actually paid until the end of the month, a pre-
payment of 6 days (31-25). The advance is the equivalent of one payroll period or 14 days.
How can an emplovee pay back the advance?
1. A deduction will be made from the employee's final paycheck.
2. The employee can establish a payroll deduction payment plan with the City.
How much can the advance be for and how will it be reoorted?
The advance check should be in $100 increments based on the net payroll of a 14 day payroll cycle.
The advance should be supported by a signed request by the employee and the balance owing should
be disclosed to the employee on their paystubs.
Future changeover for firemen and selected individuals
Selected individuals whom may have a negative impact on future retirement benefits should be
exempted this change in payroll cycle.
Firemen should not be included into this cycle until their union contract coincides with the 28 day
payroll period.
I hope this letter is helpful in awareness or any changes you think may be necessary. If you have any
questions please don't hesitate to call.
Citv of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7000 Fax - (406)758-7758
To: Kerry Marvin, AFSCME Union President
From: Chris Kukulski, City Manager
Marti Hensley, Personnel Specialist
Re: Bi-Weekly Payroll
Date: August 14, 2001
This memo serves as notice of intent to implement a bi-weekly payroll beginning December 20, 2001. This
will move everyone except the Fire Department Union to the same uniform payroll. The intent is to
eventually have everyone on the same pay schedule. All new hires and seasonal employees will also be on
a bi-weekly schedule. This bi-weekly schedule was also discussed during negotiations.
It is the intent of City of Kalispell to implement this new pay period and pay date with as little impact on the
city employees as possible. We have chosen December to implement this new pay schedule because January
2002 is a three paycheck month. Therefore, everyone will receive three (3) checks shortly following Christmas
(January 3xd , 17' & 31' �. This also gives all employees over 120 days notice, hopefully this will allow
enough time to make any personal budgetary changes. Please see the attached calendar for time sheet
deadlines and paycheck dates.
Monthly: The employees who are paid by the month will have the option to take a one time only
advance on December 10, 2001 for 80 hours. You will be given the option to pay this advance
back when you terminate employment with the City or you can pay it back by taking a payroll
deduction each pay period until it is paid. You will need to sign an authorization form for this
advance which will be kept in your personnel file.
Hourly: The employees who are paid by the hour will get a paycheck on December 11, 2001 for 64
hours (November 21 thru December 1). Another paycheck will be issued on December 20,
2001 for 80 hours. This will result in 16 hours less pay.
We will be communicating directly with the employees to give them notice and to explain the pay periods,
time sheet deadlines and pay dates. If you have any questions, please feel to contact us.
cc: Glen Neier, City Attorney
Amy Robertson, Finance Director
Thelma Keys -Nicol, AFSCME Union Secretary
Sun
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November 2001
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DATODEND
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MONTHLY
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NEW PAY
December 2001
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TIME HEETS
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SHEET
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