How to Select the Best Payroll Schedule for Your Organization

When choosing a payroll schedule, consider the nature of your workforce and the resources available for payroll management. For instance, a company with numerous independent contractors might find a monthly schedule suitable, while a small business with a limited HR team might prefer a bi-weekly schedule. 

It's up to you, the HR professional, to weigh your options and choose a schedule that fits the needs of your organization. Read more to learn about particular payroll schedules, why they may or may not work for certain organizations, and how to optimize your payroll process. 

Why Is Choosing a Payroll Schedule Challenging?

Choosing a payroll schedule is challenging because no matter what you choose, someone will ask, "Can I just get paid weekly?" They will even ask this if you already have a weekly schedule, but that's just the world of work.  

Employees base financial decisions around the time their paycheck is deposited, and that frequency is deeply impactful on your company culture, employee satisfaction, and administrative efficiency. 

How often has an employee asked you, "When am I getting paid?" or "Why didn't that commission show up on this week's check?" The answers lie within the payroll schedule you use and how it relates to the pay period, pay date, and pay frequency.

Remember: a payroll schedule is a combination of your company's pay period and pay date. A pay period establishes how often employees receive a paycheck (sometimes called "pay frequency"). The pay schedule the employer chooses determines the number of pay periods in a year. The pay date is the actual date employees are paid (or "paycheck received"). 

Often, the end of a pay period and the pay date may not always be the same date. For example, if a pay period ends on a Wednesday, the pay date may be the following Friday. Choosing Wednesday to end the pay period is a strategic move, as it gives HR Parties of One time to troubleshoot payroll errors before employees expect to receive compensation. 

Timeliness and error reduction aren't the only factors worth considering when it comes to making such an important decision. 

Four Factors to Consider When Selecting a Payroll Schedule 

1. State Laws: State regulations dictate the minimum pay period frequency. Many states require at least semi-monthly pay periods, while others, such as California and Connecticut, mandate weekly pay periods depending on the job, company size, and other factors.
2. Processing Costs: Running payroll incurs costs. Organizations must factor in these expenses when choosing a payroll schedule. Yes, people will ask for weekly checks, but running payroll 52 times per year could severely strain your budget. 
3. Accounting Implications: Federal law requires weekly overtime calculations, which could make the payroll process more time-consuming if you do not use an all-in-one HRIS with time and attendance, payroll, and benefits administration to reduce the risk of error. 
4. Benefits Deductions: The timing of benefits deductions should align with the chosen pay schedule. Both employers and employees must be clear on when these deductions occur. Ideally, you have something like BernieBill to mitigate the back-and-forth with carriers in the event a correction is needed. 
5. Workforce Needs: A monthly payroll schedule is not going to be the most popular choice for about 99.99% of the workforce. A more frequent schedule can improve retention, and in certain cases such as seasonal hiring or contracting freelancers, it can improve recruitment, too.  

Note: Deciding a pay schedule may not even be an option for you. Review the Department of Labor table to see what states have payroll regulations. 

Pros and Cons to Different Pay Schedules

The four most common pay schedules include monthly, semi-monthly, bi-weekly, and weekly.

1. Monthly Pay Schedule
Occurs once a month on a specific recurring date.

Paychecks per year: 12

Payroll date: End of the month (ex: April 30).

Hours per monthly pay period: 173.33 hours

Pros: 

1. Simplifies benefits deductions.
2. Lowest processing cost.

Cons 

1. Least preferred by employees due to infrequent paychecks.
2. New hires may wait over a month for their first paycheck.

Overview

The least common pay schedule is monthly. Ideal for managing benefits and lowering costs, terrible for retaining employees. 

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2. Semi-Monthly Pay Schedule
Occurs twice a month on two specific recurring dates.

Paychecks per year: 24

Payroll date: Typically the 1st and 15th or the 15th and 30th of every month.

Hours per semi-monthly pay period: About 87 hours

Pros

1. Aligns with monthly benefit deductions.
2. Regular pay dates simplify accounting.

Cons

1. Complicates overtime and commission payouts.  
2. Not good for hourly employees.

Overview

Balances benefit management and regularity, but not ideal for hourly employees. Since the workweek is typically 87 hours per pay period and some overtime hours may be split between two different pay periods, it could be difficult to make adjustments.

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3. Bi-Weekly Pay Schedule
Occurs every two weeks on a specific day of the week.

Paychecks per year: 26

Payroll date: Usually every other Friday.

Hours per bi-weekly pay period: 80 hours

Pros

1. Simplifies overtime calculations, because the overtime earned in one week will occur in the same pay period.

Cons

1. Can complicate expense accruals. With the bi-weekly pay schedule, two of the twelve months will have three pay periods. In these situations, paychecks are earned in one pay period, but not paid until the next pay period.
2. Can complicate benefit deductions. Companies will instead have to manage benefit deductions based on the total number of annual pay periods (26) instead of a monthly basis.

Overview

The most common pay schedule is bi-weekly. It's a popular choice that facilitates overtime calculations, but can challenge accounting practices.

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4. Weekly Pay Schedule
Occurs once a week on a specific day of the week.

Paychecks per year: 52

Payroll date: Usually every week on a Friday.

Hours per weekly pay period:  40 hours

Pros:

1. Favored by hourly employees and those with irregular schedules.

Cons: 

1. Highest processing cost and time commitment. 

Overview

Best for companies with many hourly employees, but the most resource-intensive option. If payroll is swamping your time as is, this is perhaps not your most ideal option. 

 

Improve Your Payroll Processing with BerniePortal

Streamlining payroll can be challenging, but tools like BerniePortal offer the full suite of HR administrative capabilities to minimize challenges, reduce time spent running payroll, and improve your culture, retention, and recruitment efforts. 

Ready to make your role as strategic as it can be? Learn more about BerniePortal payroll and how it's the best solution for your small to midsized business. 

 

Additional Resources

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