Choosing a Pay Period

When choosing a pay period for your business, there are many variables to take into account. Selecting the best option for your employees can be crucial to company morale, turnover, and overall employee satisfaction – making the decision an important one. Take a look at the need-to-knows of payroll periods to see what structure works best for you and your employees.

State Laws

Nearly every state in the United States has a payday requirement, or the minimum frequency for paying employees. While some states require weekly or monthly payment, others may mandate payment on a semimonthly or biweekly basis. Pay periods can also be determined based on occupation. Be sure to check your state’s law before selecting a pay period to ensure compliance.

Each state’s payday law can be found here!

Weekly

A weekly payroll equates to employees being paid every week, as its name suggests. This means employees will receive 52 paychecks within a calendar year, typically distributed on the same day of the week. Though not as common, this payroll structure has its perks. Here is an overview of the average pros and cons to a weekly pay period for employees.

Most frequent pay period
Consistent schedule easily understood by employees
High preference for employees who live paycheck to paycheck
Better for employee budgeting
Easiest to calculate overtime for irregular schedules

More processing time for your accountant
Payroll runs can become costly if charged per run
Months can overlap in the week, complicating accounting
Increased paper waste if utilizing printed checks

Biweekly

Biweekly payroll is the most frequently used pay period for employers, and is considered the most convenient. Employees receive their paychecks 26 times a year, typically equating to twice a month. Each paycheck consists of 80 hours. These paydays occur on the same day of the week, every other week. For example, an employer may choose every other Thursday as their employee’s paydays.

Moderate to High preference for hourly workers
More paychecks for employees
Less processing time than weekly payroll
Overtime is easier to calculate for hourly employees

Two months out of the year will have three pay periods, complicating bookkeeping. Payroll debits may not be aligned with payroll credits on your balance sheet – making it more difficult to project future cash flow
Smaller paychecks for employees

Semimonthly

Comparable to the biweekly format, a semimonthly pay period means employees are paid twice a month on specific days. For example, an employer may choose to pay their employees on the 5th and 20th of each month, as opposed to every other Friday (biweekly). There are 86.67 hours per pay period with this structure. Take a look at the pros and cons of this commonly compared pay period.

Larger paychecks for employees
Reduced payroll processing time, making it easier to budget your payroll and reduce margin of error
Benefit deductions are easier to manage since benefits usually run on a monthly basis

Moderate to Low hourly employee preference
Difficult to calculate overtime for hourly workers
Less consistent than other payroll structures since the day employees get paid will be different each pay period
Holidays and weekends make processing more difficult, leading to paying employees in advance or delaying their pay

Monthly

Running only 12 times out of the year, the monthly pay period is one of the least common pay structures. There are 173.33 hours per pay period, with payday typically being the end of the month. Here are the advantages and concerns to take into account prior to implementing this pay period.

Least amount of work for processing payroll
Cheapest option for payroll expenses since payroll is processed only once per month
Largest paychecks possible for employees

Not compliant with many state laws
Low to Very Low employee preference
Large payday gaps make it difficult for employees to budget

Leaning towards one payroll structure more than the other? Or, even thinking about adjusting your current pay periods? Contact us for more information, or learn more about our payroll services, equipped with specialists ready to help your company process payroll the right way!