Pay Periods - Everything You Need to Know
Weekly, bi-weekly, semi-monthly, or monthly? It’s not how much you pay your employees matter; it’s about when they are getting paid. Regularly scheduled pay periods are a vital aspect in determining the successful relationship between employers and employees.
One of the significant challenges businesses face today is choosing the right fit timeline for paying your employees. How often you pay your employees helps your business’s bottom line as it helps to attract and retain great performers.
Suppose you are looking to choose a pay period for your new venture or consider changing your existing payment schedule. In that case, this article will let you know the basics about different pay periods.
What is a Pay Period ?
AAs we all know, pay periods or pay cycles are the regular schedules that determine how often your employee wages are calculated and paid. There are different kinds of pay periods like weekly, bi-weekly, semi-monthly, or monthly. The type of pay period for each business will be based on their business and management decisions. Some companies may have different pay periods for employers like hourly paid employees and salaried employees.
What’s the difference between a Pay Period and a Pay Date ?
Pay periods are the employers’ time to track and calculate the hours worked by the employees. Data gathered is used to process payroll accurately for each employee.
Pay date is the date during which paychecks are distributed or directly deposited in employees’ accounts.
What are the different types of pay periods ?
Organizations need to decide to choose the accurate pay periods fitting for them.
|Pay Period||Payday Frequency||No: of Paychecks every year|
|Weekly||Once a week||52|
|Bi-weekly||Every other week||26|
|Semi-monthly||Twice a month||24|
|Monthly||Once a month||12|
Now, let’s move on to see the advantages and disadvantages of each pay period.
In this, employees will be paid once every week. Mostly payroll is scheduled to run on the same day of every week: on Thursday or Friday. Hourly employees are often paid weekly. This type of payroll is commonly followed in mining, construction, manufacturing, and transportation industries.
- Easy to calculate hours of employees
- Flexible payments, any issues can be resolved quickly.
- Costly to run payrolls often
Also called fortnightly or every other week, employees are paid once every two weeks. This type of payroll is often seen in health service industries.
- Employees are paid often.
- Cost and time-efficient than weekly pay
- Suitable with a large number of hourly employees
- Management must pay attention to accurate pay schedules.
- It may be confusing to manage benefits premium bi-weekly.
Employees receive two paychecks during a month. Semi-monthly payroll is very similar to a biweekly payment. The first pay period runs from 1 to 15th of every month, and the second pay period runs from 16 to the end of the month. Professional services, finance, and information sectors are widely using semi-monthly payrolls.
- Both parties do not get confused about the payroll dates.
- A regular and consistent pay schedule
- Aligned schedule with payments for benefits and taxes
- Days may get changed depending on bank holidays.
- Suitable for exempt salaried employees.
- It may be challenging to calculate overtime.
4. Monthly Pay
Employees are paid once every month. It is the most common, simplest, and least expensive payroll to administer. But these are less popular among employees because they need to maintain proper planning and budgeting.
- Least expensive payroll
- Easy to manage
- Time-saving and cost-effective
- Employees may face a potential financial strain.
- Days may change due to bank holidays.
- Find hard to manage their budget.
How are pay periods determined ?
According to federal laws, employees subject to pay at regular intervals. Most employers are free to choose the pay periods they like, but there are limitations in some states.
Choose a pay period that applies to the management concerns and check local requirements in each state where your company has employees.
Which pay periods is best ?
The most common pay period followed in the U.S is biweekly pay periods. But it doesn’t mean that biweekly payment is suitable for your business too. Every company may have a unique payroll based on their organization type. It is essential to figure out the pay period fitting your business needs.
Though employers may choose their pay frequency by considering their employees’ desire to be paid often, it usually depends upon the company’s cash flow and the expense required to run each payroll.
The main thing to remember while setting up payroll is the payday; it is a promise made by the employers to the employees. Making a payday on which your employees can rely is an example of a job well done. The pay period that you choose should work for you well.
Though a tiresome process, you can make your payrolls easier with FoxHR. Generate effective and error-free payrolls and that too in less time. Integrate the FoxHR platform and make your every payroll a happier one!
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