Unusual payroll method

[Neosavvy]

My former employer in Colorado, USA uses a payroll method ive never heard of. Every week they cut hand written checks that are considered to be advancements for hrs worked minus 20% "estimated" tax withholding. The excess funds are held until the end of the month when their cpa does the actual calculations and cuts hard checks for the difference. I wanna know how obscure a practice this actually is. Whether or not it's legal and why these excess funds weren't immediately and in fact still haven't been returned to me even though I've been separated from the company for almost 2 weeks.

 

[PayrollHRGuy]

Colorado maximum pay period is one month. So they are legal on that front.

If you quit they have until the next regular pay data, not "advance date" to provide your final check.

If you were discharged they are in violation of the law.

https://www.colorado.gov/pacific/cdle/final-pay

As to the obscurity of the pay practice in general? I'd have to say it is fairly rare as compared to other pay schedules in general.

 

[Neosavvy]

Colorado maximum pay period is one month. So they are legal on that front.

If you quit they have until the next regular pay data, not "advance date" to provide your final check.

If you were discharged they are in violation of the law.

https://www.colorado.gov/pacific/cdle/final-pay

As to the obscurity of the pay practice in general? I'd have to say it is fairly rare as compared to other pay schedules in general.

My main curiosity has to do with interest. If they implement this procedure at several businesses with a dozen or more employees each. Depositing these excess witholdings in a high yield account in order to accrue interest . They would be using money that should have been in my pocket as capital to make a considerable return on... perhaps it's more of a moral issue but still... im hurtin and they know it
And after i was told they would have a check for me two days ago im still waiting

 

[LdiJ]

Colorado maximum pay period is one month. So they are legal on that front.

If you quit they have until the next regular pay data, not "advance date" to provide your final check.

If you were discharged they are in violation of the law.

https://www.colorado.gov/pacific/cdle/final-pay

As to the obscurity of the pay practice in general? I'd have to say it is fairly rare as compared to other pay schedules in general.

I agree that its an odd way to do things. However, it appears that they are choosing to pay only once a month, but realize that their employees probably need to receive money more often than that.

 

[LdiJ]

My main curiosity has to do with interest. If they implement this procedure at several businesses with a dozen or more employees each. Depositing these excess witholdings in a high yield account in order to accrue interest . They would be using money that should have been in my pocket as capital to make a considerable return on... perhaps it's more of a moral issue but still... im hurtin and they know it
And after i was told they would have a check for me two days ago im still waiting

If you made enough money that there would be any significant interest then it would take a lot more than 20% to cover taxes. They would have to have payroll of a couple of hundred thousand or more to have 20% yield any significant interest. On top of that, most of that money would be held anyway until its time to submit it to the feds, and they may very well be monthly depositors.

 

[Zigner]

I suppose the OP could simply demand that s/he be given a check only once per month so that s/he doesn't have to worry about this.

This, obviously, doesn't apply. Oops.

 

[PayrollHRGuy]

My main curiosity has to do with interest. If they implement this procedure at several businesses with a dozen or more employees each. Depositing these excess witholdings in a high yield account in order to accrue interest . They would be using money that should have been in my pocket as capital to make a considerable return on... perhaps it's more of a moral issue but still... im hurtin and they know it
And after i was told they would have a check for me two days ago im still waiting

They would be legal if they were not paying you at all until the monthly payday.

You haven't told us if you were quit or were discharged so we can't tell you if they are late paying you. We would also need to know when the next scheduled payday is.

P.S. There are really no short-term "high interest" savings accounts.

 

[Taxing Matters]

My former employer in Colorado, USA

So your employer was headquartered in Colorado. But what about you — where did you actually work? That matters because it is the law of state in which you worked that applies, not the law of the state where the company is based.

As noted by others in Colorado that pay system is not illegal, nor is it illegal under federal law. Nor does Colorado or federal law require that the employer pay interest on the amount paid monthly when they square everything up.

 

[FlyingRon]

I was paid monthly for years without any "advance" payment on the month. Not illegal in most states.

 

[Stephen1]

I know of a couple companies that pay monthly but provide mid-month draws, usually about, but less than, half of the expected monthly net. Then at the monthly pay the actual amount is computed and the draw is deducted from the net to arrive at what the check should actually be.
I'm trying to think of what advantage it is to the employer to compute and list the 20% holdback. Perhaps it is to help him ensure he has enough funds in his account at the end of the month to make his tax deposit.

 

[PayrollHRGuy]

I'm trying to think of what advantage it is to the employer to compute and list the 20% holdback. Perhaps it is to help him ensure he has enough funds in his account at the end of the month to make his tax deposit.

Perhaps, or it could simply be to not take all of the taxes out of the "real" check.