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The most common pay period types, and how to choose

Amy Bourne |

Businesses face a lot of common payroll issues, but sometimes even choosing a pay period can be difficult. Should you pay employees every week? Every month? Twice a month? Each option has its own set of advantages and disadvantages that vary depending on the size and scope of your team.

How To Choose a Pay Period

Each type of pay period has pros and cons, so how do you choose which one is best for your business? There are a number of factors you should consider, including:

  • How much your employees get paid
  • How regularly your employees earn overtime pay
  • How much time/money you can invest in payroll processing

Note: you’ll also want to check if your state has any specific payday requirements that must be followed.

Weekly

Payroll Periods Per Year: 52

Weekly pay periods are commonly used in the construction industry and other skilled trade businesses. This option is a favorable choice for workers who make an hourly wage and expect a consistent cash flow each week. Trade job employees often have to work overtime and have schedules that may fluctuate from week to week, which is why a more frequent pay period is sometimes preferred for compensation.

Due to some of the restrictions it can present, weekly payroll just not as common in salaried contexts.

One drawback is the cost. If you outsource your payroll processes to a third-party company, you’ll likely get charged per processing transaction. Plus, processing payroll isn’t always fast and easy. If you have salaried employees with no overtime pay responsibilities, you might save time and money by using a less frequent pay period.

Bi-Weekly

Payroll Periods Per Year: 26 (sometimes 27)

When employees are paid bi-weekly, they will receive compensation 26 or 27 times a year—typically on a set day, like Friday. This every-other-week approach works well with salaried employees and some hourly employees, provided they are not living too tightly, i.e. “paycheck to paycheck”.

Semi-Monthly

Payroll Periods Per Year: 24

Compensating employees semi-monthly (to be clear: twice a month) is a very common practice when dealing with a salaried staff. With this pay period, employees typically get paid on set dates, such as the 1st and 16th of every month.

For many salaried workers, semi-monthly pay periods provide enough cash flow with simple processing. This option is also more consistent than weekly and bi-weekly payroll as it guarantees payment twice a month, no more and no less. Employees will know what to expect each month—and so will you.

Semi-monthly pay periods can become a bit messier and harder to manage if you try applying them to hourly employees who regularly work overtime.

Monthly

Payroll Periods Per Year: 12

With a monthly payroll, employees are paid on a specific date once every month. This date is typically the first or last day of the month, but can sometimes be mid-month. The main advantages of using a monthly payroll for your business is that it has the lowest processing cost and provides much cleaner accounting. But most employees want a more frequent cash flow.

Once you’ve decided on a pay period, get in touch with ExakTime to find out how we can seamlessly sync your time records with your payroll software to save you time and money on processing your payroll.

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Amy Bourne is the marketing copywriter for ExakTime. She enjoys learning about the real challenges faced in the construction-related field, and providing content that helps business owners work smarter.

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