Pay Group

What Is a Pay Group?

A pay group is a set of employees that are grouped together for payroll processing purposes. These subsets follow specific rules in your payroll software, allowing them to be paid differently than the rest of the employees at your company and/or other custom pay groups in your system.

5 Examples of When Pay Groups Are Used

Pay groups typically exist in situations where employees share similar characteristics. Here are five examples of when pay groups are needed in your payroll software:

1. Pay Frequency

While 43% of US employers pay their workers biweekly, you may have some employees who need to be paid weekly or monthly. It’s easier for payroll professionals to group those employees together in the payroll system to ensure they get paid on the same schedule and no one gets missed.

2. Exemption Status

The Fair Labor Standards Act (FLSA) requires you to pay covered, nonexempt employees at least the federal minimum wage and 1.5 times their normal wages for any overtime hours worked. Having separate pay groups for exempt and nonexempt employees in your HR payroll system can help you remain compliant and avoid costly fines and penalties.

3. Union Membership

Union members often work under collective bargaining agreements, which employers must honor. Grouping union members ensures that they get paid per their contracts and keeps the company out of legal trouble.

4. Tax Status

It’s vital that your company withhold the correct amount of state and federal tax from every paycheck. Not doing so can lead to compliance violations. Creating a different pay group for tax-exempt employees can help you achieve this goal.

5. Executive Status

Executives are often highly compensated, salaried employees, while the rest of the workforce may receive hourly pay. Placing these executives in a separate pay group allows a responsible party to run payroll processing for those on their level and ensure compliance with relevant policies.