Payroll is like riding a bike

BY GREG TONER

Originally published in OVMA Focus Magazine Nov/Dec 2023

This year, I got to teach two things that I love to do: I taught my daughters how to ride a bike, and I taught practice owners and their administrators how to run payroll using cloud tools.

Like riding a bike, payroll is easy until something unexpected happens. Riding a bike on a flat path with no cars, potholes, cracks, hills, puddles, wind, pedestrians or other cyclists is easy. Riding a bike on a city street during rush hour in a rainstorm is an entirely different experience.

Similarly, running payroll on a regular cycle, where no one was sick, no one took a vacation, every- one showed up on time, there were no statutory holidays and there were no banking holidays to mess with processing timelines, is easy. Get your hours, enter them into your system and go. No problems at all.

With the holidays approaching, payroll is about to start looking like biking down a city street, during rush hour, in the rain.

There are four big issues to watch out for:

Statutory holiday pay

In Canada, there are designated holidays where employees are entitled to a day off with pay. Two of them fall in December: Dec. 25 (Christmas Day) and Dec. 26 (Boxing Day). Shortly after, there’s also New Year’s Day.

Depending on how your pay periods land, all three may be in the same pay cycle.

In Ontario, statutory holiday pay is calculated as 1/20 of the hours that an employee worked in the preceding four weeks. Essentially, the average length of their workday over the last four weeks. Some software automatically calculates this for you, while others require that you do it on your own, and if you’re calculating payroll manually, you’ll obviously need to calculate this as well.

Vacation pay

With so many holidays in such a short period of time, it’s likely that you’ll have staff off during the two weeks leading up to the end of the year. It’s a good idea to have a calendar and know who’s on and who’s off throughout those two weeks and figure out who is using vacation days and who might have run out of vacation days.

Most software can track your staff’s accrued vacation time, so it’s easy to know how many hours your team members have that can be used over the holidays.

If you don’t have up-to-date calculations, determine the year-to-date vacation entitlement and how many hours are left. Compare this to your team’s vacation plans to see if there’s anyone who doesn’t have enough vacation time, and then decide whether you’ll let them carry a negative vacation balance into the beginning of the next year.

Sick pay

As kids go back to school and winter descends, it’s inevitable that you’ll have staff members off. Depending on your policies, some will use sick days or vacation days, and some will have unpaid time off, adding another level of complexity to your payroll around the holidays.

Bank holidays

If you’re paying your team through direct deposit, you know that your payroll provider will need several business days to withdraw the funds from your account and deposit them into your staff members’ bank accounts.

Over the holidays, with the statutory holidays outlined previously, you’ll need to make sure that you don’t miss deadlines, as the banks will be closed, meaning you’ll need to run payroll earlier. Take a moment in early December to note your payroll processing deadlines and mark those dates in your calendar.

Payroll around the holidays can be messy, but if you’re paying enough attention to what’s going on around you, it can be just like a solo ride down a bike path on a sunny day.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org