How to Choose the Right Pay Frequency for Your Business

Whether you are just hiring your first employees or you want to make changes to your existing payroll structure, you need to choose your pay frequency with care. Some payday schedules commonly used in the US are better for certain purposes than others. For example, a weekly or biweekly schedule is better for employees that work overtime, a monthly pay period might be cheaper and more efficient for the payroll processor and, well, one or two of them might not even be allowed in your state.

State Requirements

The minimum frequency with which you should pay your employees is regulated by individual states. You’re always free to pay employees more often than the requirement but it must follow a regular schedule and employees need to be aware of that schedule in advance. Check your state’s payday frequency requirements here.

Once you’ve figured out what frequency you have to adhere to, you can narrow it down to your company’s preference. If your state requires that you pay your employees at least twice a month, you can also use biweekly and weekly paydays because these offer more frequent paychecks.

Payday Frequency Options

The required payday options in the U.S. are weekly, biweekly (which means every two weeks), semi-monthly (which means twice a month), and monthly. Contractors may be paid at irregular intervals but regular employees may not.

• Weekly (52 periods per year)
• Every Two Weeks (26 periods per year)
• Twice Monthly (24 periods per year)
• Monthly (12 periods per year)

Monthly Payroll

Monthly payroll is a great option for the business itself but not so great for employees. An employee has to be a stellar bookkeeper of their own finances to make this work since they have to budget their money for the whole month. For businesses, however, it is the cheapest and simplest route since payroll only has to be run once per month and simultaneously with monthly reports and deductions.

Semi-Monthly Payroll

Semi-monthly paychecks are probably the most convenient for salaried employees since it is easiest to pay bills when checks come on certain days of the month. Hourly employees that make overtime, however, can get very confused with semi-monthly paychecks. When payroll gets cut in the middle of a workweek https://www.timesheets.com/blog/2016/09/what-is-a-workweek/ – say the payroll close is on a Wednesday – that means that the employee won’t see overtime for that week until the next paycheck. It’s difficult for anyone to wrap their head around workweeks but especially for employees who have no experience with payroll calculations.

Biweekly Payroll

Employees who earn overtime should be paid on a weekly or biweekly basis to avoid the confusion of basing payroll calculations on previous pay periods. But while biweekly paychecks make the most sense to the employee, they can be a hassle for the payroll processor. Since there are not exactly 4 weeks in every month, two months out of each year will come up with one extra paycheck in a biweekly system. This is a little inconvenient for the payroll processor since the reports are run monthly and since benefits are calculated monthly.

Weekly Payroll

Weekly payroll is a popular option in the service trades like construction, plumbing, etc. Weekly payroll is not the most commonly used option in other lines of work because running payroll this frequently can be expensive and time consuming for the person who has to run the reports. Most payroll companies charge each time payroll is run. And if payroll is done in-house, the in-house accountant has more work to do, like calculating payroll taxes, overtime, accruals, etc.

Weekly payroll checks are the most desirable for employees, though. It’s easier for them to see the overtime they earned when the workweek matches the weekly pay period. And more frequent checks is better for managing money for those living paycheck to paycheck, which is the case for many employees across the nation.

Peggy Emch is an author and the blog editor for Timesheets.com, a company that tracks time for payroll reports. Through her writing, she is committed to helping people navigate the complex world of employment law and workforce management.