A pay group is a group of employees who are paid on the same schedule and have been grouped together based on shared traits. This type of employment grouping makes payroll processing more straightforward and more efficient. As all employees are different, Pay Group plays a significant role by enabling an employer to arrange employees in a way so that they are paid at various pay intervals and from various business accounts.
When Do Employers Assemble Pay Groups?
An employer or organization can use or assemble pay groups when they have different demographics and frequencies of pay within the company. However, an employee can only be part of one pay group, and it is the employer’s duty to assign each group a designated code in the company’s payroll system. These codes are used to transfer the employees’ paychecks of a particular group. Moreover, companies can have multiple Pay Groups according to the company's needs.
How Does an Employer Assign Employees in a Pay Group?
An employer or company uses various characteristics or primary identifiers to distinguish each employee and assign them a designated pay group. The common vital identifiers are pay frequency, executive, regular, location, etc. It is usually the duty of the Human Resources Department to identify each employee and assign them to pay groups. However, mistakes can easily occur, so the supervisor or higher management must use a company-provided checklist to verify each employee is allocated to the appropriate pay group.
Here is a checklist of some standard components in a company checklist to assign pay groups.
Employees having similar or the same workplace schedule
Employees with the same pay frequency
Employees using the same bank for salary transfer
Employees receiving pay from the same area or location
Employees similarly impacted by multiple labor laws
(Note: If a company decides to change an employee’s pay group, it will apply from the following time period. Moreover, if an employee wishes to change their pay group, they must request their employer early before the next payroll.)
What are Some Pay Group Examples?
Pay group examples can help start-up companies make an efficient payroll system. It also allows large industries to keep track of their employee’s wages and salaries, as employers can use it in multiple locations in various ways.
1. Pay Groups Based on Locations
Companies can have multiple offices in various cities or countries. It is not possible or efficient to assign a person working in Arizona to a location in Florida. So, companies maintain pay groups named after office locations and follow various paycheck schedules—for example, Texas Pay Group, Florida Pay Group, New York Pay Group, etc.
2. Salaried VS Hourly
Even if the locations are the same, companies with multiple payrolls can separate employees for more straightforward payroll processing. Hourly and salaried employees may be placed on two different payrolls at the preference of the employer. These are sometimes referred to as the hourly and salary Pay Groups. However, the salaried and hourly pay groups can also be classified on the base of exempt or non-exempt job categories.
3. Tax Based
Employers can classify and assign employees to Pay Groups based on their taxes. Tax-exempt and non-exempted employees can be categorized into different pay groups to simplify the payroll process.
4. Regular Employees VS Executives
Separate executive pay groups help secure the higher management's salary information from the general payroll administrators. These Pay Groups are usually run by other executive employees, while the standard administrators run the regular employee pay groups.
5. Union Based
Some companies have workers in a union, and they can separate union workers from non-union workers for easy payroll processing.
6. Pay Frequency
Organizations pay employees biweekly or semi-monthly, which can be challenging to keep track of. Separating pay groups depending on the pay frequency of the employees help payroll administrators work efficiently and provide paychecks on time.