What You Need To Know About Pay Periods
As an employer, as soon as you take on employees, you will need to assign a pay period for your business. This is the most basic aspect of payroll. You know that you will pay your employees, now you must decide the schedule for these payments. Let’s break down the pay period and discuss your options.
What Is A Pay Period?
The pay period is the schedule upon which you run your payroll. When you take on employees, this is the first question you should ask yourself. You have several options, let’s weigh the pros and cons of each.
What Are The Different Pay Periods?
There are a few some of the common pay periods are,
- Weekly
- Bi-weekly
- Semi-weekly
- Monthly
How Do We Define The Pay Period?
Some of the pay periods are pretty self explanatory, while others are a bit more confusing.
Weekly:
This is exactly what it sounds like. You will run payroll every week. While your employees will love this, it may mean more administrative duties for you. It will also be more expensive for you to run payroll this often. Although, if you have hourly workers and part-time staff, it may be beneficial to you.
You will always run your payroll on the same day of each week. Usually, you will run your payroll at the end of the week. Everyone loves a Friday payday!
Bi-weekly:
This one is a little more complicated, so let’s simplify it. With a bi-weekly pay period, your employees get paid every other week. This doesn’t mean twice a month. When you pay your employees every two weeks, there will be some months where they receive three paychecks.
Unlike, weekly pay periods, bi-weekly pay periods are more counterintuitive. You will have to mark the calendar and keep up with your pay periods consistently. It’s not so easy as knowing, “oh, it’s friday, time to run payroll”.
There are benefits though, your employees will still have an easier time budgeting their expenses when they receive two to three checks a month. Also, because your pay periods are longer, you will have less administrative work to worry about.
Semi-monthly:
It is easy to mix up bi-weekly and semi-monthly. They are similar, but there is a distinct difference. In a semi-monthly pay period, employees are paid twice a month every month. There are 24 total paychecks and no months where there is a third paycheck.
Employers usually choose to run their payroll on the first and fifteenth of every month. They may also choose to run payroll on the fifteenth and the last day of the month. This is easier to remember than a bi-weekly pay period and employees still receive a frequent paycheck.
Monthly:
Lastly, there is the monthly pay period. This means that employers run their payroll only once per month. This is the most cost effective method, as there are costs incurred everytime payroll is run. It also requires the least amount of administrative work on the employer’s end.
However, it is very important to note that this may not be the best option for your employees. When employees only receive one paycheck a month they will have to be much more vigilant with their budgeting. As for hourly employees that do not make a fixed amount each month, this can be exceptionally stressful.
What’s The Takeaway?
Now that we have taken a deep dive into your pay period options, remember to choose wisely. Make the decision that works best for you and your employees, then stick to it.
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