When it comes to paying employees, organizations typically choose to pay on one of four schedules: weekly, bi-weekly, semi-monthly, and monthly. The rationale for choosing one pay frequency over another can vary from employer to employer, and there may be specific issues that dictate what works best for an organization and its employees.
Weekly payroll, as the name suggests, is paid on a weekly basis on the same day of the week. This can be a nice perk for employees since they don’t have to wait too long between paydays. Weekly payrolls might also be helpful for businesses with a larger population of hourly or non-exempt employees since each pay will reflect the hours worked in a single work week. However, weekly paydays mean weekly processing, and this could cause a burden for the staff responsible for getting the payrolls processed.
Bi-weekly payroll is paid every other week on the same day of the week. This schedule also allows clean records for hourly and non-exempt employees, while giving the payroll staff a bit of breathing room between paydays to focus on other duties. This schedule is predictable and is one that many businesses find easy to work with, though it can cause some complications for accounting departments when pay periods happen to cross months or years.
Semi-monthly payroll is paid two times per month. This is often confused with a bi-weekly schedule, but semi-monthly payrolls are generally paid on the same dates each month, rather than the same day of the week. This schedule works well with salaried or exempt employees, but might be confusing for hourly and non-exempt employees, since the pay periods will rarely align with work weeks and overtime calculations can often cross over to the next period. This schedule may also require some additional planning since the processing days will change from period to period depending on when the pay date falls.
Monthly payroll is generally paid on the same date each month. Like the semi-monthly schedule, this can create some confusion for hourly and non-exempt employees. Cash flow may also be a concern for both employees and employers since the pay dates only happen once a month and can require more careful budgeting and money management than some of the other pay schedules.
Which Pay Frequency Should I Use?
Federal law does not require a specific frequency for when employees need to be paid, so the decision is usually based on what makes the most sense for the employer, as well as the rules of the state(s) in which the business has employees (the Department of Labor has a table of state requirements here). Some employers choose to use a combination of schedules, with different groups of employees being paid on different frequencies. Whatever the schedule, the important thing is to have a clearly defined workweek and to make sure employees understand how and when they will be paid.
As one can imagine, dealing with the different pay frequencies can be challenging, especially since the requirements can be different from state to state. Partnering with the payroll experts at Valor Payroll Solutions can ensure your organization’s payroll schedule is in compliance, while also making sure your employees’ payrolls are handled accurately and on time. Contact us today and let us help take your business to the next level!