Payroll

What is a Pay Period?

As an employer you have a lot of responsibilities, many of which revolve around employee management. You have to hire employees, conduct interviews, determine responsibilities, delegate tasks—and that’s just for starters. But one of the most important aspects of being an employer is figuring out a pay period: How often your employees will be paid. Is it going to be weekly, biweekly, or semimonthly? Determining a pay period can help you ensure your employees are paid accurately for their work.

In this article, we will discuss exactly what a pay period is, the different types of pay periods, how to choose the right pay period for your business, and other frequently asked questions. Your employees work hard, so you want to make sure they’re compensated for their time and dedication. And that starts with determining your pay period.

What is a Pay Period?

A pay period, also known as a pay schedule, is the recurring amount of time that an employee is paid for. How frequently you pay employees depends on the length of your pay period. You can choose between weekly pay periods, biweekly pay periods, monthly pay periods, or semimonthly pay periods. The amount of time you choose for a pay period depends on a couple of factors, including the type of employees you’re paying and if they earn overtime. There are two different types of employees: salaried and hourly employees.

A pay period is important because it ensures that your employees are paid accurately for the time they worked. It also helps with payroll processing and monthly reporting requirements that you have as an employer, such as expenses, taxes, and insurance.

Types of Pay Periods

How do pay periods work? What is a payroll schedule? How often will my employees get paid? These are all questions that we will get into below.

There are various types of pay periods, but the most common are weekly, biweekly, monthly, and semimonthly. Each type will have a different number of payroll periods in a year. The number of pay periods that will work for your business will depend on the types of employees you’re paying and whether or not they receive overtime. Let’s look at each type:

  • Weekly: An employee who is paid on a weekly basis will receive 52 paycheques a year. Hourly employees and part-time employees are typically paid weekly. A weekly pay period is ideal for employees who tend to work overtime or whose work schedules change on a weekly basis. With this pay period, employees will record their hours for the week and submit a timesheet at the end of the workweek. They will then be paid in the following week because it gives the payroll clerk time to make any adjustments. Some employees enjoy a weekly pay period because it’s a more consistent cash flow.
  • Biweekly: An employee who is paid biweekly will typically receive 26 paycheques a year. Employees paid biweekly can either be hourly or salaried. Biweekly pay periods are more cost effective than weekly payroll, but it can be confusing to process payroll for months that have three pay periods.
  • Monthly: An employee who is paid monthly will receive 12 paycheques a year. Monthly pay periods typically only work for salaried employees. Employees paid on a monthly basis are usually paid on either the first or last day of the month. Monthly payroll is the most cost effective of the bunch and is the easiest to calculate. However, some employees don’t like monthly payroll because it’s a less frequent cash flow.
  • Semimonthly: An employee who is paid semimonthly will receive 24 paycheques a year. Employees paid semimonthly will typically be paid on the first and 15th of each month. Semimonthly payroll works best for salaried employees who have a consistent schedule. Semimonthly payroll is easy for both the employer and the employee. It’s easy for the employer to calculate and the employee receives a more frequent cash flow. However, the semimonthly pay period can be confusing for hourly workers if overtime needs to be applied.

The difference between semimonthly and biweekly payroll can be confusing. A semimonthly payroll schedule happens twice a month, no more, no less. A biweekly payroll schedule happens every two weeks. Semimonthly has 24 pay periods in a year, while biweekly has 26 pay periods in a year.

Regardless of the pay period you choose, it’s important to know how to reconcile payroll so you can monitor your business expenses and ensure your employees are paid correctly for their time.

How to Choose the Right Pay Period for Your Business

Choosing the right pay period is crucial for your small business and you need to evaluate a variety of factors, such as finances, logistics, and human resources. Consider the type of employees you have, the structure of your business, and if your employees are paid overtime. Here are the pros and cons to each pay period option:

Weekly pay period

Pros

  • Employees are paid often so they have a frequent cash flow
  • HR has enough time to sort through any payroll issues that may arise
  • Payment is more flexible so issues can be fixed sooner

Cons

  • Most time-consuming pay period to navigate
  • Least efficient with taxes and accruals for employees
  • More frequent payroll means it’s more expensive for the business

Biweekly pay period

Pros

  • Employees are still paid often
  • HR has enough time to sort through any payroll issues
  • More cost efficient compared to weekly pay

Cons

  • HR will have to pay close attention to specific dates so they can pay accurately
  • Pay periods can differ if the period goes over the end of the month, which can be confusing to calculate
  • Leap years cause difficulties with calculations
  • If the number of paycheques sent out exceeds 27, it can cause problems with annual pay expectations, company contributions, benefits, and taxes

Semimonthly pay period

Pros

  • Employees are still paid often
  • Employees are always paid twice a month, never less, never more
  • Employees and employers are both aware of pay dates
  • Payroll becomes more simplified and easy to navigate because of the consistent pay periods

Cons

  • Determining overtime can be confusing
  • Dates may have to change because of holidays
  • Pay dates are not always going to be the same day of the week
  • Workweeks and pay cycles may differ

Monthly pay period

Pros

  • Employers have an easy time managing finances for long-term planning
  • Well structured pay period
  • Ideal for freelance employees who invoice monthly or salaried employees whose schedules don’t change
  • Makes accrual and tax expenses easy to manage

Cons

  • Can be confusing for the employer to figure out pay dates if the pay period ends on a different day of the week each month
  • Can be confusing for employee budgeting
  • Less frequent cash flow for employees
  • Isn’t ideal for hourly employees or employees who work overtime

FAQs

What is the difference between a pay period and a pay date?

  • The difference between a pay period and a pay date is fairly simple. A pay period is the recurring amount of time worked that an employee is paid for. The pay period can either be weekly, biweekly, semimonthly, or monthly. A pay date determines the payroll tax deposit and tax filing deadlines. The pay date is used to determine when payroll liabilities are due.

What is a pay period end date?

  • The pay period end date determines the end of a pay period. For example, for a semimonthly pay period, the end date would be the first and 15th of each month. Pay period end dates can be confusing for certain types of pay periods if the pay date overlaps with the next pay period.

How does a biweekly pay period work?

  • Biweekly pay periods happen every two weeks and typically have 26 pay periods in a year, but if a calendar year contains more than 52 weeks, the total number of pay periods may vary. If figuring this out is confusing, try using a biweekly pay period calculator. A biweekly pay period calendar template is also great for business owners who struggle with creating spreadsheets on their own. A calendar template is a simple way to organize information and keep all your payroll data in one place.

Can a business change its pay period?

  • Yes, a business can change its pay period, but only in certain situations. Before you decide to change the pay period for your whole company, you need to figure out a few logistics: Does your company offer direct deposit, how do you communicate with your employees, and do you have any payday requirements? Changing the pay period will have a direct impact on your employees’ cash flow, so it’s important to take them into consideration when making any decisions about changing your pay period.

How many pay periods are there in a year?

The amount of pay periods in a year depends on the type of pay period that you choose: Weekly has 52, biweekly has 26, semimonthly has 24, and monthly has 12.

Final Notes

Overtime is something to take into consideration before deciding on a pay period for your business. You need a way to track and calculate overtime pay, which can be done with various payroll software services.

  • Setting up an efficient payroll system can be confusing, but QuickBooks Time is a great service that can help streamline various business processes. If you’re not sure how to set up payroll, QuickBooks lays out the basics and provides all the help you need, so you can be on your way to running your business and managing your employees in no time.

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