In my next three installments, I will share three Employment Contract Terms that benefit Payroll and HR, and Finance as well. Contracts are written as standard, for good reasons. When writing a employment contract or considering an exception to a standard, please take note of these tips.
Tip 1: When writing employment contracts within a country, be consistent with pay frequency. Push back on requests for exceptions.
A UK citizen, Ian, agrees to a position in Paris as a local employee of Generic High Tech Inc. The hiring manager, Laurence, is delighted because Ian speaks French fluently and has exactly the skills needed for the Paris office. Ian reviews the contract, and makes a change to his pay frequency from 13 annual pay periods to 12 annual pay periods. He doesn’t understand the concept of 13 months, and he has always been paid monthly. Laurence thinks this might be a minor change. She wants to please Ian, but she respects the opinion of Sophie, the Global Payroll Director of Generic High Tech Inc. Sophie advises Laurence strongly not to accept this exception for these reasons.
By contract, Ian’s total salary is divided by 12 and not 13, but the norm is 13. There is risk that Ian will be underpaid in his first pay period. When the time comes to pay the 13th payment, Ian’s exception could be considered an error and will be paid again. First pay cycle, Ian is underpaid and then overpaid.
Rather than being pleased, Ian is troubled. He doubts the payroll process in France. His manager is embarrassed, HR has an unhappy employee, or finance has to adjust the payroll costs on the general ledger twice. So, be smart and let consistency in pay periods be your guide.
Next month, Tip 2. No employment contracts should guarantee net salaries.