One of the first decisions you must make when hiring your first employee is pay frequency, or how often you pay your team.
If you’ve not yet contemplated payroll frequency, start doing it now. Your workers’ happiness, legal standing and cash flow might be riding on it.
What is pay frequency?
Pay frequency, also known as payroll frequency, is the rate at which you pay employees (or how many times there are in a year that you pay them). How often you need to run payroll also depends on your pay frequency.
Here are four common pay frequencies from which to choose: Weekly, biweekly, semimonthly and monthly. Your regularity dictates how many pay checks an employee gets each year.
Pay frequency options:
- Weekly (52 paychecks a year),
- Biweekly (26 paychecks a year),
- Semimonthly (24 paychecks a year),
- and Monthly (12 pays a year)
This pay frequency affects the dollar amounts of each paycheck’s wages and taxes. But it does not affect an employee’s annual tax bill or net pay (in the end, it all comes out in the wash).
Pay frequency choice #1: Weekly
With a weekly payroll, workers get their wages once per week. A weekly paid employee will get 52 paychecks in a year.
Less than other frequency options, the amount is each paycheck and it is more often. This is also the one frequency where you have to run payroll more often than with any of the others.
Pay frequency choice #2: Biweekly
A biweekly pay schedule allows you to pay your employees every other week. Workers paid bi-weekly get 26 paychecks a year.
Workers are paid on the same day of the week every pay period, for instance a Friday. Employees are normally paid two times a month. However, there are two months in the year that employees receive three paychecks instead of two (so budget wisely!).
Pay frequency choice #3: Semimonthly
For a semimonthly pay, employer pays to his employees 24 checks per anum.
It’s easy to mix up semimonthly pay and biweekly schedules. Wages are also paid twice a month for both frequencies. But there are some distinct differences in biweekly vs. semi-monthly pay.
You pay your employees on designated dates that may vary with semi-monthly frequency. For instance, you might pay an employee on the 15th and the 30th of a month. These dates can be any day of the week.
A semi-monthly pay schedule can be tough for employers and employees to follow. Employees may be paid on a Tuesday or Friday, depending on when the date falls.
Pay frequency choice #4: Monthly
If you pay monthly, and have staff members who are also paid monthly, they get one paycheck per month. An employee on a monthly pay schedule receives 12 paychecks each year.
Monthly paychecks are for greater sums of money and for less time at any other frequency. Some workers have to contend with monthly paychecks.
What is the best pay frequency?
There is no “best” or “worst” frequency. But how frequently you choose to pay your employees does influence your:
- Time commitment: Manually running payroll is time-consuming. The more often you process payroll, the greater amount of time you spend running payroll.
- Money: Do you wish to save time doing payroll with software? Great! However, a few of the payroll software providers charge you around the number of payrolls you run in a month.
- Payroll cutoff: Your payroll cutoff is based on your pay frequency, and it’s the specific date and time by which you need to run payroll for it to hit your employees’ bank accounts on payday.
Get to know more about The Payroll Company
What is the most popular pay frequency?
Every business is different. The best pay frequency for your industry, business size, and employee type (hourly versus salary) might not be the same as for the company next door.
That being said, there are some frequencies that are more common than others.
Biweekly Pay According to the U.S. Bureau of Labor Statistics, biweekly pay is among the most frequent-minute possible-pay frequencies, second only to weekly pay.
Here is the breakdown of how many businesses in the United States use each pay period:
- Pay Period How Many Businesses Use It?
- Weekly 27%
- Biweekly 43%
- Semimonthly 19.8%
- Monthly 10.3%
How to choose a payment frequency
Every business is different. Before you build a pay-frequency calendar, keep the following four factors in mind:
- Pay frequency laws
- Your employees
- Your industry
- How you run payroll
Pay frequency laws
Is there a law on the frequency of pays you need to adhere to?
There is no federal law about how often you should pick. Don’t make it infrequent though, at least keep the frequency! You cannot simply alter an employee’s frequency whenever you please.
State requirements regarding frequency of pay dictate what you can and cannot do in terms of pay frequencies. The majority of states require a minimum cadence you must maintain. Arizona, for example, mandates that employers pay workers at least twice a month and no less than 16 days apart.
Be sure to consult your state laws before determining frequency.
Your employees
How many employees do you have? Do you employees work on salary or hourly? These side-of-worker factors could influence how often you go with.
- Number of employees: At the BLS, number of employees can dictate how often you’re paid. For one, significantly more large businesses, at 66.6%, use biweekly than do the smallest size group measured, which are businesses with one to nine employees at 39%.
- Hourly vs. salary: The workers you hire also plays a role in how often your business pays its employees. You can also set different pay periods for salary vs. hourly employees (though this might be a little tricky if you’re doing payroll by hand).
Your industry
What sector is your business in? For others, your industry dictates your frequency. Some industries pay weekly, others monthly.
Nearly 70 % of construction firms pay via weekly payroll, the Bureau of Labor Statistics reports. But just 14% of firms in the financial activities sector have weekly payroll.
How you run payroll
How do you run payroll? By hand? Using software?
If you do payroll the old fashioned way, it is much more taxing to do 52 (or 26)sets of payroll rather than just 12.Typing up that many sets of Checks.
Using payroll software can dramatically reduce the time it takes to run payroll. But again, some companies tack on extra charges and charge per payroll run. Running weekly payrolls may even cost you more than running biweekly, semimonthly or monthly payrolls.
Final Thoughts
Payroll is one of the most important aspects of running a business. To take payroll from a 9 or ten to be between a zero and two on your pain scale, give the payroll professionals at The Payroll Company call today at 505-944-0105!
