How often you choose to pay your employees matters. If you don’t pay employees often enough, they can struggle with budgeting between paychecks. Pay them too often, and you might run into additional payroll processing costs. Choosing a payroll schedule might seem like a simple decision, but there are important factors to consider.
Use the links below to jump to the section that best covers your query, or read end to end for an in-depth overview on the topic.
There are four commonly used pay schedules:
Some pay schedules are more common than others. Let’s take a closer look at each type.
A weekly payroll schedule requires that you pay employees once per week, or 52 times per year. A typical weekly pay period is 38 hours. This pay frequency works well for businesses with mostly hourly employees.
A biweekly payroll schedule requires you to pay employees every other week, or once every two weeks. Biweekly payroll equates to 26 paydays per year—sometimes 27. Biweekly pay periods are typically 76 hours. This schedule can sometimes lead to employees getting paid three times in one month.
Semimonthly payroll is similar to biweekly payroll, but with a few important differences. Rather than paying employees every other week, you’re paying employees twice per month, on specific pay dates. Usually, these are the 1st and 15th or the 15th and 30th, though pay dates can vary. This payroll schedule requires you to pay employees consistently 24 times per year. Semimonthly pay periods are typically 83 hours.
A monthly pay schedule requires you to pay employees once per month, usually at the end of the month, or 12 times per year. It’s important to note that some award rules require employers to pay employees more frequently.
Check if there’s an industry award covering your employees, which contains rules about when and how often they must be paid. Most awards include a specified frequency for payment. For example:
Awards often contain a clause to say that payments can still be made in a different frequency, with the agreement of the employees. Awards may also include other clauses, such as how to pay casuals, or how to manage when the normal pay day falls on a public holiday.
Some products such as QuickBooks Payroll Advanced actually include Award rate interpretation to simplify things even more.
When it comes to choosing a payroll schedule for your business, there are a few things to keep in mind:
In the end, you need to decide what’s best for your employees and your business. There’s no right or wrong answer, and your choice isn’t set in stone. If your payroll schedule isn’t optimal for your business, you can change it. But you should avoid making changes more than once as it can cause uncertainty and confusion.
Remember, as much as we’d like to think employees work for the sheer love of the job, most of them work to get paid. Paying employees consistently, correctly, and on time is the key to pay schedule success.
*Methodology: In 2018, QuickBooks Payroll commissioned Pollfish to survey 1,000 employees (age 18+) about their payday experiences.
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