You pay for work already performed, so there’s no risk of paying for work that won’t be performed.You get time to calculate taxes, PTO and benefits before running payroll.You don’t have to project employee hours and risk being wrong.Let’s examine the pros and cons of arrearage payments in a little more detail. Pros and cons of payment in arrearsĮarlier, we mentioned that most companies in the United States use the payment in arrears method for payroll - and for good reason. Some independent contractors offer discounts if their clients pay retainer fees rather than opting for traditional invoices. A retainer agreement is a work-for-hire agreement rather than a traditional employment contract. When you pay someone on retainer, you pay them in advance for a certain number of billable hours or services. You might put a down payment on a commercial property purchase, for example, or on the total cost of a store refit. The payment represents a percentage of the item or service’s full purchase price. Down paymentĪ down payment is the initial payment you make when you buy something on credit. Generally speaking, salary advances are paid back via deductions on the employee’s wage checks. You pay your employee a lump sum, and they pay it back over a few weeks or months. In a nutshell, a salary advance is a loan given to an employee. Let’s take a closer look at a few kinds of advance payment. Sometimes, an advance payment covers the whole of a project or period of work on other occasions, you pay a rolling advance payment for ongoing services. There are several types of payment in advance. You pay your employees the following Friday, five days after the end of the workweek. Your workweek begins on Monday and ends on Sunday.From a payroll perspective, this means that you pay employees about three to five days after the end of each pay period. Most companies pay their employees in arrears. Paying in arrears: You pay employees several days after the end of a pay period.Paying current: You pay employees in advance for the work you think they’ll do.At most US companies, workweeks begin on Mondays and end on Sundays.Ī couple of payroll timing options exist, including: There are seven consecutive 24-hour periods (168 hours) in each FLSA-compliant workweek. To comply with the Fair Labor Standards Act, you’ll need to establish a standard workweek for your company. You can pay your employees weekly, biweekly, monthly or on another schedule. EIN (Employer Identification Number) hot off the press, many new employers set up electronic payroll systems to help them stay in compliance. You need to keep track of state and federal tax payments, pensions, FMLA, health insurance options and many other withholdings. Payroll can be a challenge-especially when you’re a new business owner with a limited HR department. Lawyers and other professionals frequently work on retainer, which is a type of advance payment. Manufacturers usually require full payment in advance before they begin production runs. When someone is “paid in advance,” they’re paid in full before they begin working. Also known as an arrearage payment, payment in arrears means paying someone after they complete work. “Paid in arrears” has a slightly different meaning. Being in arrears with a utility bill or a mortgage payment isn’t a good thing. What does “paid in arrears” mean?īy itself, “in arrears” means that a payment is late or overdue.
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