A pay group is a set of employees who are grouped for payroll processing based on shared characteristics or pay schedules. This allows your business to streamline payroll processes by applying the same payroll rules to an entire group of employees. 

Pay Group Examples

Let’s take a look at the most commonly used pay groups:

  • Pay calculation method: Salaried employees receive the same amount each pay period regardless of how many hours they work. In contrast, hourly employees are paid based on their worked hours each pay period. These two employee types are often placed in separate pay groups.
  • Location: If you operate in multiple states or countries, you may be subject to different laws or business rules in each. A pay group organized by location ensures each region’s payroll rules apply to every employee based there.
  • Pay schedule: Employees can also be grouped based on pay frequency. For instance, you would separate employees on weekly and monthly pay periods.
  • Labor union: If some of your employees belong to a labor union, grouping them ensures compliance with union agreements.
  • Executive pay: High-level executive pay details are often access-restricted. Viewing and editing rights for this data typically stay with executive and high-level HR or payroll managers. Grouping these employees applies the same payroll software access rules to all.
  • Tax: Group tax-exempt employees together to avoid incorrect pay deductions.

How to Assign Pay Groups

Once you’ve decided on your categories, you can set them up in your payroll software. It’s then time to assign every employee to the right group. Create a checklist of your pay groups and cross-reference with your employees. For example, if your new hourly employee will be paid weekly you’ll assign them to two pay groups: one for hourly pay and one for weekly pay schedule. 

Adopting a payroll and HR management solution like Connecteam makes assigning pay groups much easier to track. Changes to assignments will typically take effect from the next payroll period but this may depend on the payroll software you use.