What pay frequency works best for your business and your employees? To choose the right schedule, consider employee satisfaction, legal compliance and your own cash flow. Also think about time commitment and money in terms of the number of payrolls you run each month. Let’s look at how each pay frequency works:
- Weekly — Employees are paid every week, so there are 52 pay periods every year. Businesses with independent contractors and freelance workers who are paid hourly will like this frequency. It’s also a great option for paying workers who work overtime.
- Employees tend to like getting paid sooner — especially if they are non-permanent workers with irregular work schedules.
- Weekly pay periods are easier for overtime payments; allowing payments to remain uncalculated or unpaid for longer periods can lead to a more difficult budget process.
- You may see weekly payments as too much work — you’ll have to run payroll every week.
- Using a payroll service provider that charges a fee? Weekly payments mean more costs.
- Biweekly payments — Pay employees every other week, or 26 periods each year.
- This is a less time-consuming option.
- There are fewer costs if you outsource payroll.
- The sooner you can calculate and pay hourly employees, the better for your budgeting.
- But the schedule can make monthly deductions tricky because you’ll have to pay more attention to when to include such deductions as health insurance payments.
- Bimonthly or semimonthly — You’ll have 24 pay periods every year. Every month, you’ll make two payments on specific dates, though the days may differ. For instance, if you pay employees on the 15th and the 30th, these dates can fall on any day of the week.
- It’s more employer-friendly than biweekly — it makes monthly budgeting and reporting easier.
- Employees like receiving pay consistently on the same dates every month.
- There are lower time and cost requirements — you will spend less time and money to run a bimonthly/semimonthly payroll.
- Paydays occasionally fall on weekends or holidays, which creates a delay in how fast employees can access payments.
- Monthly — This option includes 12 pay periods, and compared to other schedules it’s most convenient for employers. Often used for salaried workers, it uses up the least resources in terms of time, money and paycheck processing.
- Deductions are easier.
- Payroll processing is simpler.
- This timing is not suitable for hourly workers who may not want to wait a month to receive their pay.
- Many states require employers to pay hourly workers more frequently.
Consider your situation
As you can see, choosing the best payroll schedule for your company depends on several factors:
- If you run payroll by hand, shorter pay frequencies require more payroll runs.
- The only federal requirement is you must keep a consistent pay frequency. But what if you have a legitimate business reason? Make the change permanent, and demonstrate you are not avoiding overtime pay or minimum wage and that you are not unreasonably delaying wages.
- State laws cover payroll rules. Whether you have a majority of salaried, hourly or on-contract workers, all their needs must be considered. Some states have rules regarding paying hourly and contract workers.
- What industry is your business in? Some industries tend to pay weekly while others tend to pay monthly.
You can pay employees more frequently than your state requires. But keep in mind that state laws are subject to change. Other considerations to keep in mind involve having simplified paycheck processing and higher employee satisfaction levels — and choosing the frequency that your own cash flow best supports.
