What Payroll Schedule Makes Sense for Your Business? [Guide]

Every small business has to decide which payroll frequency is best for their business and employees. Find out which schedule makes the most sense for your business.

Key takeaways:

• Legal requirements may give you a maximum pay period, but you can pay more frequently if you like.
• There are four common payroll frequencies, so you’ll be sure to find one that fits your needs.
• Choosing a payroll frequency requires you to consider a lot of different factors, including employee preference, accounting abilities, and tools available.
  

The most common payroll frequencies in the United States are monthly, semi-monthly, biweekly and weekly.

State laws typically require a minimum pay period; you can always pay more frequently but not less. But each pay schedule has advantages and disadvantages. 

Let’s take a look at the differences between semi-monthly and biweekly, the two most popular options.

Table of contents

• Semi-monthly vs biweekly payroll
• Weekly payroll and scheduling
• Key considerations for choosing between payroll frequencies
• When I Work can help you simplify your payroll process

Semi-monthly vs biweekly payroll

Semi-monthly pay is twice per month (for example, every 15th and 30th), and biweekly pay is every two weeks (for example, every other Friday). 

The difference between semi-monthly and biweekly may seem minor. After all, they sound the same and there are only two extra checks for biweekly (26) versus semi-monthly (24). 

While most employees prefer being paid more frequently, there are pros and cons to either pay period for both employer and employee.

Advantages of semi-monthly pay

Your accountant runs monthly reports, not weekly reports. That is why your accounting department may prefer semi-monthly pay periods, since the last paycheck of the month will typically coincide with the end of the month. 

For companies paying their employees biweekly, two months out of the year will have three pay periods instead of two. Your accountant must have payroll expense accruals so costs are recognized in the month the compensation was paid.

Benefits also typically run on a monthly basis. Some of your employees may have voluntary deductions for healthcare. 

With semi-monthly, these deductions are easy. If you are paying your employees biweekly, however, you will have to manage deductions based on the total number of annual pay periods (26 pay periods or 27 in some years).

Advantages of biweekly pay

So who prefers biweekly pay periods to semi-monthly? Salaried employees are exempt from collecting overtime but hourly employees are not. That’s one reason hourly employees prefer biweekly pay periods. Hourly employees may have inconsistent weekly work schedules which can include overtime.

For example, your employee may work 60 hours one week. For a biweekly pay schedule, this overtime is easy to calculate. 

It is more complicated for companies on a semi-monthly plan because they typically pay their hourly employees at 86.67 hours per period (which is a little over two 40-hour weeks). If those extra hours are between two different semi-monthly pay periods, you will have to make adjustments and it can be confusing.

Weekly payroll and scheduling

For many companies in the trades (e.g, construction, plumbing, etc.) or food service industry, weekly payroll can be a popular option. Employees like it more, but there are a few things to consider before moving to a weekly payroll schedule.

Advantages of weekly pay

Just like hourly employees prefer biweekly pay periods, they may prefer weekly periods even more. Weekly payroll better matches an hourly employee’s cash flow needs. If an hourly employee has an irregular working schedule with overtime, weekly payroll best reflects the compensation they’ve earned.

For example, if your employee works 60 hours one week and 20 hours the next, weekly payroll makes sure your employee is paid that valuable overtime in the first week when they may need it most. Even salaried employees may appreciate getting paid more often!

Disadvantages of weekly pay

For many employers, however, weekly payroll can be too costly. Most payroll vendors charge for each time payroll is run. If you have dozens of employees on weekly schedules, those fees can add up. 

Another stumbling block for weekly payroll is time. Each time you run payroll, it can take up a lot of time for you or your payroll administrator, especially if there are payroll accruals and overtime.

Key considerations for choosing between payroll frequencies

Before you decide on a payroll frequency, you need to consider everyone involved in the process. 

First, think about your employees and what they would prefer. Do they like having the predictable schedule of the same two paydays a month with a semi-monthly frequency? Or would they prefer the few extra paychecks a year that a biweekly frequency allows. Or do you operate a business that experiences a lot of turnover? Maybe a weekly pay schedule would be a competitive advantage and keep great workers on staff longer.

Next, consider your needs. Do you have someone to do payroll for you, or will you be spending your time managing it? If you have in-house accounting, they will probably have preferences on what makes the most sense. If it’s going to be you, how much time do you have each month to devote to running payroll?

Save time and money with When I Work

One easy way to save time and give everyone what they want is to use When I Work. You’ll get employee scheduling, time tracking, and team messaging, all in one platform, so you can save time and money on all of it.

Sign up for your free trial of When I Work today to see what a difference it can make for your business.