Managing employee payroll is vital to running a successful business. While many tasks are associated with payroll management and compliance, they’re all based on which employee payroll schedules you choose.
Not all companies operate on the same payroll schedule. While most companies pay their employees biweekly, that is not your only option as an employer. The best payroll schedule for your company depends on many factors, including but not limited to the size of your business.
Understanding the difference between the types of pay periods can help you determine which payroll schedule is the best fit for your business and how many pay periods in a year you can process.
What Is a Pay Period?
A pay period is the time frame for which an employee is paid when they receive their paychecks. The pay date comes at the end of every pay period or whenever a business owner can process payroll.
Pay periods have scheduled start and end dates that, in most cases, occur consecutively. For example, if the first pay period of the year is expected to end on Jan. 15, the next pay period would begin on Jan. 16 or the next business day.
Following a set pay period schedule helps employers manage cash flow and keep their accounts organized. Any errors made in a paycheck concerning under or overpayment can be easily traced to the corresponding pay period.
Regular pay period schedules can also help employees keep track of how much they were paid for the allotted period that they worked. When employees understand the payroll schedule, they can better manage their finances and understand the value of their work. It also helps promote salary transparency.
Keep in mind that employee pay periods are different from an employer’s payroll filing periods. Those payroll tax deadlines are determined by the IRS as well as state and local tax offices. Depending on the type of tax, they may be due monthly, semi-monthly, or quarterly.
What Are the Different Types of Pay Periods?
The different types of pay periods are based on the duration of the pay period as well as how often an employee gets paid. Typically, employers can choose from four main types of pay schedules.
Weekly pay periods are popular with employees, as it means that they receive their paychecks more often than they would on other schedules.
Employees are paid on the last day of the week for their completed work. Weekly pay periods make scheduling easy but can increase workload for employers.
With a biweekly payroll schedule, pay periods are two weeks long. Employees are paid every two weeks.
While many employers prefer biweekly pay periods, they may be harder to schedule than weekly pay periods.
Semi-monthly payroll schedules are often confused with biweekly schedules because both typically pay employees twice a month (depending on how many weeks in the month).
In most cases, the first pay period of a semi-monthly starts on the first of the month and ends on the 15th of the month. The second pay period often starts on the 16th and ends on the last day of the month.
Unlike biweekly pay periods, semi-monthly pay periods are not exactly two weeks long but may instead be 15 to 16 days each.
Some employers employ monthly pay schedules, under which employees are paid once a month, typically at the end of the month. While monthly pay periods make scheduling smoother, they are not very popular among employees.
Custom Pay Periods
Depending on their needs, employers may choose to employ a custom pay schedule with paydays that deviate from the four main types. For instance, an employer may set a pay period from January 15 to February 15 instead of from January 1 to January 31.
How Many Pay Periods Are in a Year?
The pay schedule you choose directly impacts the number of pay periods in a year, which affects how taxes and deductions are taken out of wages. The number of pay periods also determines how a salaried employee’s gross pay is divided by paycheck.
Here is an overview of how many yearly pay periods there are for different payroll schedules:
- Weekly Pay Period: Because there are 52 work weeks in a year, there are typically 52 pay periods under a weekly payroll schedule. Leap years may have 53 pay periods a year.
- Biweekly Pay Period: When employees are paid every two weeks, they have 26 pay periods a year. A leap year may have 27.
- Semi-Monthly Pay Period: An employee under a semi-monthly schedule is paid twice a month or 24 times a year.
- Monthly Pay Period: There are 12 pay periods a year under a monthly pay schedule — one for each month of the year.
Which Pay Period Type Is Right for Your Business?
When deciding which payroll schedule is best for your company, there are many different factors to consider. The first is state laws — most states require a minimum pay frequency timeframe with different stipulations and exceptions from state to state. For instance, Connecticut requires weekly pay periods but may allow exceptions for monthly periods. In Arizona, paydays cannot be more than 16 days apart.
After determining which state laws apply to you, think about how pay frequency influences your business expenses. For example, you may not be able to handle the administrative costs of running payroll on a weekly basis.
Another one of these factors is whether or not your workers are salaried, hourly, or contract workers. For example, hourly workers are often paid weekly as it is much easier to track the hours worked and overtime pay for each week than each month. On the other hand, contract workers are often paid for specific tasks or shorter durations of time, which may warrant a custom pay period.
You may also consider the size of your company. The shorter your pay cycles, the more often you’ll have to run payroll, which can be daunting if your small business will see significant growth over the next year. Companies with many employees often opt for biweekly or semi-monthly pay to make payroll less time-consuming.
The most common pay period schedule is the biweekly pay schedule, which is used by an estimated 43 percent of businesses in the country. The second most commonly employed schedule is the weekly schedule, with monthly payroll periods being the least common.
How To Use a Payroll Calendar To Determine Pay Periods
A payroll calendar helps you determine pay period dates based on your chosen pay schedule. At the end of every calendar year, outline pay dates for the next year based on the pay schedule.
In this calendar, you can also include payroll processing dates for HR professionals as well as important tax deadlines. Account for weekends and holidays when banks may be closed. For instance, if you choose a semi-monthly pay period that issues checks on the first and 15th of the month, you will have to change the dates when they fall on Saturdays.
Making a payroll calendar can help you stay organized. They also make payroll schedules accessible to employees and partners. Share this calendar with your employees in several channels, and be ready to answer any questions they may have.
Simplifying Payroll Compliance
No matter which pay period schedule you choose to employ, you need to ensure you follow state and local legislation regulating pay. Mosey can tell you when you need to open payroll accounts in which states and localities. No matter where your employees are located, you can see which state laws apply to your company and accurately determine withholding, unemployment insurance, and paid family medical leave (where applicable).
Mosey’s easy-to-use online platform can smooth payroll management so your HR team focuses more on helping employees. Schedule a demo today to see how Mosey can help your growing business.
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