How it Affects Payroll Management and your Employees
Every employee’s favorite workday is payday, and it’s important that your payroll schedule reflects the needs of your employees and what works best for your payroll management system. Bear in mind that your state and particular industry might have some payroll management requirements you need to follow.
There are four pay frequencies to consider with payroll management: Weekly, biweekly, semi-monthly and monthly. Each has its own advantages to consider.
Weekly pay means that your employees get paid every week on the same day. This works great for employees who live paycheck to paycheck and need money coming in as frequently as possible. Better yet, weekly pay helps you simplify your payroll management process due to its set time frame, especially for hourly workers. However, this also means that you’d be processing payroll every single week, and that might be too much work for your payroll staff or too much cost if you’re using a payroll service or accountant to handle your payroll management.
The next option, biweekly pay, cuts down on the work and costs of payroll management with only 26 pay periods a year to process rather than 52. Biweekly pay also simplifies processing with a set time frame and lets employees know when they’re getting paid (typically on the 15th and the last day of the month). Additionally, it minimizes document filing, which makes payroll management easier. A further benefit is that two weeks of pay is substantial enough to help your employees get by from pay period to pay period.
Semimonthly & Monthly
Both monthly and semimonthly pay work to your payroll management advantage, but have some drawbacks for your employees. Semimonthly pay means only 24 pay payrolls to process a year, and monthly only 12. That can cut down on payroll management costs and document filing. However, many employees dislike having to wait that many weeks or a month to get paid. It can also be difficult to track overtime using these types of pay for hourly employees.
On the other hand, payroll management for salaried employees tends to work better with semimonthly and monthly pay due to cleaner benefit deductions and not having to worry about salary overlapping into a new year. Handling vacation accruals and working around the dates of a payroll schedule are also easier, though deposit dates will vary and you need to keep tabs on them. Another drawback is that the dates on which your employees get paid using monthly or semimonthly payroll schedules tend to shift and employees can lose track.
Choosing a pay frequency is a balancing act that requires understanding the needs of your employees and your business. Which works best for you depends on the types of workers you employ, the current payroll management resources you have in-house or the payroll service budget of your business.