A pay period is the recurring time for which an employee receives payment.
As a small business owner, it’s up to you to learn how to do payroll and select the best pay period type for your employees. From daily and monthly to biweekly and semimonthly, employee pay periods can be tailored to meet the payroll needs of your team and business.
Read our guide to learn about the types of pay periods, the seven factors to determine which one is right for your business, and what a real-world example of a salary broken down by each pay period looks like.
There are various types of pay periods, but the most common are weekly, biweekly, monthly, and semimonthly. Each type will have a different amount of payroll periods in a year. The number of pay periods that will work for your business will depend on the payroll schedule, the types of employees you’re paying, and whether or not they receive overtime. Let’s look at each type.
260 pay periods a year
Daily pay periods are a type of pay period that allows employees to access their earned wages on a daily basis. There are around 260 business days in a year, but the amount of pay periods can vary depending on what days employees work.
52 pay periods a year
An employee with weekly pay will receive 52 paychecks 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 every week. However, a more frequent payroll schedule can also be more expensive for the business.
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 the following week because it gives the payroll clerk time to make adjustments. Some employees enjoy a weekly pay period because it’s a more consistent cash flow.
26 pay periods a year
An employee who is paid biweekly will typically receive 26 paychecks a year. Employees paid biweekly can either be hourly or salaried. Biweekly pay periods are more cost-effective than weekly payroll, but processing payroll for months with three pay periods can be confusing.
Employers who use this payroll schedule can benefit from a more cost-efficient way to pay their employees than weekly pay periods. However, pay periods can quickly become confusing.
24 pay periods a year
An employee who is paid semimonthly will receive 24 paychecks a year. Employees with semimonthly salaries will typically receive payments 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 employee costs. However, the semimonthly pay period can be confusing for hourly workers if overtime needs to be applied.
12 pay periods a year
An employee who is paid monthly will receive 12 paychecks a year. Monthly pay periods typically only work for salaried employees. Employees with monthly salaries usually receive payment 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, especially when taxes are concerned. Employers can also rely on the consistency of this payroll schedule.
A fixed pay period is a method of paying employees where they receive the same amount of money for each pay cycle, regardless of how many hours they work or how much they produce.
This is great for a variable pay period, where employees are paid based on their performance, such as commission, bonuses, or overtime. Employers can also show their employees that they value them by offering consistent yet flexible pay.
A custom pay period is a type of pay schedule that is not fixed or recurring but rather determined by specific circumstances. For example, a custom pay period may occur when an employee resigns or is terminated, and the employer needs to calculate the final wages and deductions for that employee.
A custom pay period may also be used for seasonal employees, employees who work on a project basis, or employees with irregular hours. This pay period can help employers create customized pay plans for their employees on a case-by-case basis.
Instant pay period is a term that refers to a system where employees can access their earned wages before their scheduled payday. This means that workers do not have to wait for weeks or months to receive their income but can withdraw it as soon as they complete their work hours. This pay period can potentially reduce administrative costs and burdens for employers.
Consider if you have an employee who earns $50,000 a year. Here is how their payments might breakdown across each pay period — and how many pay periods to expect:
Although monthly paychecks may be larger, they’ll be less frequent than other pay period options. Consider these factors when selecting your pay period.
One of the most important decisions you have to make as a business owner is how often to pay your employees. The pay period you choose can affect your cash flow, payroll costs, employee satisfaction, and compliance with labor laws.
There is no one-size-fits-all answer to this question, but some of the factors you should consider are:
By weighing these factors carefully, you can choose a pay period that works best for your business and your employees.
Now that you know how to choose the right pay period for your business, consider leveling up your payroll process to accommodate your pay schedule.
Haven’t set up a payroll before? Read our guide to learn how to set up payroll and pay your employees on time.
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