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Comment by roboy | Hacker News Reader

Q from outside the US: why is capital needed for payroll mid month? Are there some automatic insolvency processes if it is missed by a day? Why do the companies fall apart if there is just a few days of payment delay? (I mean it is obviously a shit situation, and having to tell the team payment might take a few days more than usual is bad, I am just surprised how 2 days of no-cash seem to wreak havoc…)

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Most companies in the US do payroll on either a 2 week cycle (which sucks because some months you do 3 and some times you do 2), or 1st and 15th (or otherwise twice a month). March 15 is a very common payroll date.

They're batch processes, done by dedicated payroll firms, since there are lots of tax/other obligations as well.

Missing payroll by even one day causes 1) lots of drama with employees 2) starts some legal problems 3) potentially screws up people's healthcare/other benefits 4) potentially causes tax problems. Some of this is with the state, some federal.

Payroll is basically the second to last thing you want to miss (certain government obligations above it, since they have liability for the officers directly).

(This is mostly because employers are presumed to have a lot of power vs. employees, and generally do, and there have been a lot of historical abuses of companies paying people slowly, withholding wages, etc., which puts the employees in a position of "do I quit and guarantee I don't get paid, or do I work a little bit more and maybe collect what I'm owed" and then companies continuing to abuse it...)

Quite interesting, here in the U.K. it’s generally monthly payroll, usually towards the end of the month, something like closest working day after the 25th is common

In Puerto Rico (where I live) there's an even weirder system -- people usually get/expect (and certain classes of employment obligate) a "13th month" check. Pretty common in LaLtAm; exists in some of Southern Europe too.

Some contracts are even getting a 14th one. 13th is fairly common in Italy and it’s usually bundled together with your December one.

Western Europe as well, it's called a holiday allowance in the Netherlands

In Argentina we changed the mandatory "13th month" in December to a mandatory "half month" in July and another "half month" in December.

Yep, in Germany too, hence my surprise.

Some people like the "extra" checks of a 2 week cycle. Others prefer twice monthly cycles because it better aligns with expenses like mortgages and utilities.

Lots of people like the extra checks, but very few companies like paying that way; it makes modeling so much harder. If you were doing weekly financials maybe but most companies do monthly.

I'm not sure. I've been with a company that's switched to a bi-weekly. But not sure of the reasoning. But probably something to do with payroll predictability.

What’s the first thing? Can you expand on that part. Ty

Wage payment delays in the state of California are severely punishable under law:

https://www.ottingerlaw.com/blog/wages-hours/employer-not-pa...

“If you receive a late paycheck, California Labor Code 210 requires employers to pay a penalty of $100 for an initial violation.”

Severely is overselling it.

Its $100 if it is both a first offense and not willful. For any willful or intentional delay, or a second or subsequent late paycheck regardless of willfulness, the penalty is $200 plus 25% of the payment that was due.

(And if any terminal paychecks are late, there are greater penalties – waiting time penalties equal to an average days pay for each day of delay up to 30 days – though I don’t recall if there is a wilfullness condition or modification to that.)

The link I found undersells it, too. In some cases, the corporate veil can be pierced and executives can be made personally liable.

That's for "not willful."

Except Musk has established precedent at Twitter that you can just fire employees for cause.

1) California employment is at-will, employees can always be fired.

2) What on earth does this have to do with running payroll late?

On 1), you actually have even higher obligations to pay IMMEDIATELY if you fire someone, including for all other money owed (accumulated vacation/sick days, etc.)

> Except Musk has established precedent at Twitter that you can just fire employees for cause.

“Established precedent” is…not a fair description of action which is being challenged in the courts, where no precedential legal decision has been made.

Also, firing employees would just make the California rule requiring immediate payment of final paychecks, with waiting penalties of 1 days pay for day of delay up to 30 days, applicable, as well as triggering other time-sensitive legal obligations that a company without access to cash might not want.

Plus, it means that once you get access to your cash again, you don’t have the employees (and might have a lot less positive image in the community you would want to hire from to replace them.)

This is somewhat disputable, but regardless, it has nothing to do with delayed payments.

a) most employees are paid every 2 weeks and b) there are laws that say an employer is committing a crime if wages are not paid on time. So any properly run business takes great care to ensure that adequate cash is on hand to cover wage commitments (not just the money due to employees but also taxes due to state and federal governments). When thar cash goes up in SVB smoke, that's a big and immediate problem. You could in theory be sued or even go to jail.

> there are laws that say an employer is committing a crime if wages are not paid on time.

Unless it is at least willful, its probably not a crime. It is, however, generally illegal and carries a civil cost even when not criminal.

I don't know but... some companies used to pay me biweekly, every odd monday, then there is company used to paid me once end of month and another paid once per month but in middle of month, with limited accounting resources they pay bills twice, first of month for outside and middle of month for salaries and stuff

> Q from outside the US: why is capital needed for payroll mid month?

The US largely does payroll biweekly (every two weeks). Sometimes weekly, although usually not in tech. It isn't like Germany or whatever where payroll is only once a month.

> The US largely does payroll biweekly (every two weeks).

Weekly, biweekly, monthly, and semimonthly are all common; In most states, there are rules setting minimum frequency (and sometimes regulating on what days as well as frequency), and they may vary by industry and job type. E.g., for California: https://www.dir.ca.gov/dlse/faq_paydays.htm

I believe biweekly (or semimonthly, which is very similar) are more common than the others, at least in tech.

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