How to Choose the Right Pay Schedule

A company’s pay schedule determines the length of its pay periods and pay dates. Employers in the US have several options when determining when and how often to pay their employees. Although it may seem like a simple decision, many factors may need to be considered before settling on what works best for an organization. A company’s pay schedule can have an impact on employee satisfaction, retention, and even recruitment.

The most commonly used pay schedules are weekly, bi-weekly, semi-monthly, and monthly – each has their advantages and disadvantages. To make the right decision for your company’s pay schedule, you’ll want to consider these while factoring in employee needs/preferences, the organization’s cash flow, and the requirements of each state where you have employees. Here is a quick breakdown of the different schedules:

 

Weekly

A weekly payroll is just that: weekly. This schedule generally works well for organizations with a lot of hourly workers, and employees enjoy the benefit of getting paid every week. The regular structure makes processing schedules predictable and easy to plan. On the flipside, weekly payrolls might mean there is little or no downtime for your payroll team. As many people are aware, payroll is much more than just clicking a few buttons and getting people paid, and processing payroll every single week can be a burden that makes it difficult for your team to complete their other tasks.

 

Bi-weekly

Bi-weekly payrolls are paid every two weeks. Similar to the weekly schedule, this works will with hourly workers and is predictable and easy to plan. It also has the added benefit of being processed every two weeks, meaning it will allow your team some breathing room to focus on other tasks between pay dates. Many people confuse this with the semi-monthly schedule described below – it’s important to understand the difference. Bi-weekly means every two weeks, and results in a couple of months each year that will have three pay dates, which add up to 26 (sometimes 27) pay dates each year. A semi-monthly schedule is twice a month, and should always result in 24 pay dates in a year. Weekly and bi-weekly schedules may also create some accounting complications, since the periods will have a tendency to cross over into different months, and some extra work may be needed to properly record the expenses and liabilities.

 

Semi-monthly

As mentioned earlier, these are schedules that pay twice per month, generally on specific dates instead of a day of the week. This makes it a bit less ‘routine’ than the weekly and bi-weekly schedules, since the timing of each pay date can vary based on where it falls during the week. Knowing that there are always two pay dates each month can make it easy to manage scheduled deductions and other regularly occurring items on the payroll. Many times, semi-monthly pay periods are designed to line up with each calendar month, which can make accounting much simpler. However, organizations with a larger population of hourly workers my find it difficult to track overtime and other work-week-based calculations with this schedule. Depending on the timing, a semi-monthly schedule can sometimes create a big lag for new employees’ first paychecks as well.

 

Monthly

Employees are paid once per month. Although this may be the easiest payroll schedule for a company to manage (especially if most or all of its employees are paid on a salaried, non-exempt basis), note that this schedule is not allowed in all states. Employees generally don’t enjoy having to wait an entire month between pay dates, and being paid only once per month can make it difficult for employees to manage their cash flow and personal finances. The delay in pay for new employees mentioned above can be made even worse with monthly payrolls.

 

Regardless of which of these schedules your company uses, the experts and professionals at Valor Payroll Solutions can take the stress out of your payroll. Contact us today to see how we can help!

 

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