Several potential disadvantages exist when processing payroll on a semi-monthly frequency in the state of California. California is one of the more stringent states as it relates to its labors laws. Human resources and payroll personnel must proceed carefully when performing their duties.
The state of California has traditionally had wage and hour laws that far exceed the scope and level of enforcement in other jurisdictions up to and including the federal government. For example, its minimum wage rates for exempt and non-exempt workers have typically far exceeded amounts set by the federal government or other states. Reversing a direct deposit paid to an employee without the express written consent of that employee is usually illegal whereas it's permitted within five days by most other jurisdictions.
General Semi-Monthly Challenges
One disadvantage to running semi-monthly payroll in California is common from state to state but takes on greater importance in the state due to its stricter laws. Additionally, the state has made it quite simple for aggrieved employees to report violations that occur while working in the state. That disadvantage is a mismatch between the payroll workweek, which is what determines overtime, and the semi-monthly frequency which will encompass one full payroll week and two partial workweeks for most periods. Payrolls that only consist of exempt salary employees are often immune from compliance hassles since the employees' pay does not vary from period to period.
California Semi-Monthly Rules
There are wage, hour and pay-period timing regulations unique to California. California has an extensive online resource whereby employees can submit complaints to the state. Following all applicable rules and regulations to the letter is an important habit to have. The first one to bear in mind is that regardless of frequency, California’s mandates about overtime and double-time are still in effect. Any time you work beyond the first 8 hours in a day are overtime, and anything beyond 12 hours worked in a day is double-time. This is in addition to the federal standard that mandates overtime for anything over 40 hours in a workweek. The other major rule that California employers must heed is that payment of wages is due within seven calendar days of the period end for the paycheck. You should take note that calendar days include holidays and weekends. The details of this regulation are posted on the California Department of Industrial Relations website.
As long as payment is conveyed within a week of the semi-monthly period end, you are in compliance. However, if a holiday or weekend falls on your desired payday and your inclination is to push the payday forward, be advised that doing so is illegal if the period end to payday window would exceed seven days. In that instance, you would be advised to push the payday back to the prior business day to remain compliant within the law. Recognize that direct deposits do not typically post on weekends or holidays. Author Michael O'Toole explains in his book "Payroll Source" that an employee has not technically been paid until they have unhindered use of the funds, also known as constructive receipt.