Why does it take so long to get my first paycheck?

You start a new job. (Yay!)

You haven’t gotten a paycheck in months.

Your first paycheck takes forever to arrive. And it’s not even a full paycheck, either.

Don’t these people know you have bills to pay?

Here’s why your paycheck takes so long:

Many companies pay in arrears. Which is a fancy way of saying that there’s a gap between the end of the pay period and when you actually get paid.

If you’re paid hourly, there’s literally no way to get you paid without a gap.

Here’s what’s happening in that time:

⏳ Get to the end of the pay period = 1-3 bags of groceries

First, you have to get to the end of the pay period. Usually, that’s every other Friday or the 15th/last of the month (but not always). Nothing happens until the pay period is over.

👀 Approvals = 2-5 sleepless nights

If there are time cards, you need to give people a couple of days to submit them after the pay period ends.

Then you need to give managers some time to review and approve them.

Then you need to give payroll time to process them.

Often these approvals run simultaneously, but it just takes one oblivious flake to hold up the whole train.

🏦 Bank processing times = 3-5 overdraft fees

Business day 1: The company submits the transaction to the payroll company.

Business day 2: The payroll provider withdraws money from the company bank.

That money has to clear.

Business day [more than 2]: The payroll provider initiates the deposit.

Business day [more than 2+1]: You see the money in your bank.

💸 How the money moves

Behind every payroll provider there's a treasury that actually moves the money back and forth.

To speed up processing, they often initiate payments before the company’s money has actually cleared in treasury accounts.

That means that for a couple of days, the treasury is actually issuing credit to your company.

(Remember how the SVB collapse disrupted thousands of companies’ payroll? This is why.)

The larger and more complex your company’s payroll is, the bigger the risk they take on.

If your company has had payroll drama in the past, they may be less inclined to issue that credit and insist on longer processing times to make sure the money clears.

All of this slows down how quickly you get paid.

---

Employers, here's what you can do to get people paid faster:

💰 Give signing bonuses. Even little ones, so they can keep paying the bills.

💰💰 Have separate payrolls for salaried and hourly workers, so salaried people can be paid current.

📆 Consider weekly payroll, if you have a lot of hourly employees with variable schedules.

🚆 Create an efficient process for approvals.

⏩ Choose the shortest processing period your payroll provider allows. If you haven’t checked in a while, see if you qualify for next-day payroll.

😬 For the love of god, make sure that the account is funded.

---

Getting too many complaints about payroll? Let's talk. We can chat about where things are breaking down and what simple changes can keep everyone paid and happy.

Get in touch

Because accurate pay is cheaper than errors.