Choosing how often your people get paid is a critical decision when running a business. There are four payroll schedules that are allowed in the United States; weekly, bi- weekly, semi-monthly, and monthly. Like with most things in running a business, there are advantages and disadvantages to each choice. Also keep in mind not all of these choices are allowed in every state. 

To ensure you stay in compliance with state or occupational requirements consider hiring  Payroll Source Group. 

Weekly Payroll

Payroll is run once a week on a set day.  For example, employees will get paid every Friday.  Employees will be paid 52 times during the year. This type of pay schedule is typically seen in trade companies (e.g. plumbing, construction, electrical, etc.)

Advantages: 

  • Employees enjoy receiving weekly paychecks, especially if overtime is worked because they receive the extra finances quickly.  
  • Weekly paychecks usually matches employees’ cash flow needs.

Disadvantages:

  • Payroll companies charge by the number of times payroll is run. 
  • Administration of a weekly payroll may be time consuming and costly. 
  • More work to calculate monthly payroll taxes, benefits, accruals, overtime, etc.

Bi-Weekly Payroll 

Payroll is run once every other week on a set day. For example, employees will get paid every other Friday.  Employees will receive 26 paychecks during the year. 

Advantages: 

 It is cheaper for the company to run payroll every two weeks instead of every week.

  • Overtime is easy to calculate.
  • Your employees will love those bonus months when they are paid three times instead of two.

 Disadvantages:

  • Two months out of the year the employees will be paid three times. This creates a hectic month for the payroll accounting team. 
  • Paychecks fall on different days throughout the month. This can make budgeting and setting up automatic payments difficult for employees. 
  • More work to calculate monthly payroll taxes, benefits, accruals, etc.

Semi-monthly Payroll

Payroll is run on set days during the month. For example, employees will get paid on the 10th and 25th of the month. There will be 24 paychecks in a year.  (This is usually the most convenient schedule for salaried employees.)

Advantages:

  • Twice monthly paychecks on the same date can make budgeting and setting up auto-pay easy for employees. 
  • Less expensive for the company to run payroll because there are fewer pay periods in the year than when weekly or bi-weekly payroll is run.

Disadvantages:

  • More work to calculate monthly payroll taxes, benefits, accruals, overtime, etc.
  • Overtime is more difficult to calculate because if the extra hours worked are split between the two pay cycles it can be confusing and potentially upset the employee if they were expecting more money.   

Monthly Payroll

Payroll is run once a month. For example, employees will get paid on the 1st of every month. Employees will be paid 12 times throughout in the year.  

Advantages: 

  • Payroll is only run 12 times a year, so it is much cheaper than other options.
  • Payroll also matches up with monthly payroll taxes and benefits.

 Disadvantages:

  • Even for the most conscientious budgeter, only getting paid once a month may be difficult, especially around the holidays. (As a former, single working mother, I can personally attest to the difficulty of this type of pay schedule. Even though I am extremely careful with my money only getting paid once a month made it difficult when unexpected school charges popped up.)
  • Not available in every state or to every occupation.

 

No matter what payroll schedule(s) you decide to implement at your business, take some stress off of running your company and let Payroll Source Group handle all of your payroll needs.

 

 

By Betsy Drellack – www.decorousdiva.com

 

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