May 1, 2023

What is the Best Payroll Schedule for Your Business?

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Key takeaways:

  • The most common payroll schedules are on-demand, weekly, biweekly, semi-monthly, and monthly.
  • The best payroll schedules remain compliant with federal and state labor laws, meet workforce payday expectations, and keep company finances balanced.
  • Payroll software can help maintain reliable and flexible payroll schedules while avoiding errors and inefficiencies in payroll processes.

Take a look at our Payroll Software Guide for a complete list of solutions to tackle your biggest payroll concerns.

What is a payroll schedule?

A payroll schedule is the frequency with which employees get paid. Consistent payroll schedules help companies manage company cashflows, mitigate wage and hour risk, and ensure their employees get paid regularly. Failing to establish a proper payroll schedule not only means companies are violating employment laws but also damaging their employees’ livelihoods.

What are the most common payroll schedules?

Each payroll schedule has its benefits and drawbacks — some are even prohibited, depending on state laws. The most common payroll schedules include the following:

According to the U.S. Bureau of Labor Statistics, biweekly pay periods are the most common among private employers, followed by weekly, semi-monthly, and monthly schedules:

Data: U.S. Bureau of Labor Statistics, Current Employment Statistics survey. Image: TechnologyAdvice.

No one schedule is best for all businesses. In some cases, companies operate with two payroll schedules to accommodate differing employee classifications.

For example, having both a weekly and semi-monthly payroll makes sense for companies with hourly and salaried employees, as the former helps with overtime calculations and the latter with tax deductions. International companies could also benefit from multiple payroll schedules due to differing legal and cultural expectations.

The best payroll schedule for your business balances your business’s finances, administrative workloads, workforce demographics, and the payroll expectations in your industry to make your paydays a smooth and painless process.

Also read: What Are the Best Methods for Paying Employees?

On-demand

An on-demand, or Earned Wage Access (EWA), schedule means employers pay employees some or all of their employees’ pay as soon as they earn it. In some situations, employees can completely control how and when they receive their wages.

Although businesses can manually administer on-demand payroll schedules, many payroll software vendors offer EWA management services as part of their features. Wisely by ADP, for example, gives employees access to their wages after they’ve earned it through their mobile app at no additional cost to employers.

Pros

  • Employees can access wages as soon as they’ve earned them.
  • It’s an attractive employee perk in industries with high turnover.

Cons

  • There is a greater chance of paycheck errors, such as tax deductions, missing sick pay, or incorrect hours.
  • Additional fees may be associated with more frequent payroll runs or on-demand payroll management services.
  • There are legal risks to employers who pass on-demand service costs to employees.

When to choose an on-demand schedule: This type of schedule is a fantastic way to attract and retain employees during economic uncertainty, as employees can access their wages when needed for more financial security. 

Moreover, many on-demand payroll management services include financial wellness tools that employees can leverage to plan and save for future expenditures. For businesses struggling with employee retention, on-demand payroll schedules can help drive employee trust and loyalty so they stay longer.

Weekly

Employers pay employees every week in weekly payroll schedules, with 52 paydays per year. Pay periods are seven days long, often between Sunday to Saturday or Monday to Sunday. Paydays are on a particular day of the week following the end of the pay period. Occasionally, employers may need to pay employees a day earlier or later if a national or bank holiday falls on their typical payday.

Pros

  • Paydays are consistent.
  • There is little wait time for employees to access their wages.
  •  It’s easier to prevent wage and hour violations with simplified overtime calculations.
  • Weekly schedules align more closely with government regulations, which is useful during government or company payroll audits.

Cons

  • There is more payroll administrative work for HR and accounting departments.
  • Payroll costs are higher compared to biweekly, semi-monthly, or monthly payroll schedules.

When to choose a weekly schedule: Businesses in industries with a majority of hourly employees, such as manufacturing, food, retail, or construction, should choose weekly payroll schedules to make overtime hours, shift differentials, sick pay, or other paid leave easier to track and calculate.

These industries typically have a higher percentage of hourly or lower-wage employees. Weekly payroll schedules allow employees access to their funds quicker, says Peretz Rapoport, Vice President of Product at  human capital management (HCM) healthcare software vendor, Empeon. It supports employees who rely on their paychecks as well as smaller companies that need a relatively “quick and simple” payroll.

Biweekly

A biweekly payroll schedule means businesses pay employees every two weeks for a total of 26 paydays per year. Pay periods are 14 days long and, similar to weekly payroll schedules, paydays occur after the end of the pay period on the same day every week, unless it occurs on a bank or national holiday. Biweekly payroll schedules are also the most common payroll frequency in the U.S.

Pros

  • Paydays are consistent.
  • There is a lower administrative burden on employers.
  • There is a longer timeline for employers to become cash positive to pay for labor costs.

Cons

  • Businesses need to budget accordingly for the two months per year with three payroll runs.
  • It can be difficult for accounting departments to compare and reconcile expenses for those two months.

When to choose a biweekly schedule: As most companies in the U.S. have a mix of hourly and salaried employees, biweekly payrolls balance frequent paydays for their employees with a more lenient cashflow schedule for employers. As Rapoport explains, it is “a happy medium between prioritizing expedited access to funds for employees and the logistical and financial considerations of running payroll.”

In other words, employees and employers benefit from biweekly schedules: employees with more reliable paychecks and employers with less frequent and comparatively easy payroll calculations.

Semi-monthly

Semi-monthly payroll schedules mean employers pay employees twice every month, typically on the 15th and the first or last day of the month. Pay periods run between the first and 15th of the month and then the 16th and final day of the month.

Unlike biweekly payroll schedules, there are only 24 paydays per year. Paydays are also based on the day of the month, not a particular day of the week. As a result, the number of days in each pay period vary slightly.

Pros

  • Salaried employee payments are easy to track and manage.
  • It’s easy to calculate tax and benefit withholdings.
  • There is less administrative work for accounting departments.

Cons

  • The overtime calculations for hourly employees are complicated.
  • Paydays are less frequent.
  • Paydays might change if the first, 15th, or last day of the month falls on a weekend or holiday.

When to choose a semi-monthly schedule: Semi-monthly schedules are ideal for companies with mostly exempt employees, as calculating overtime for non-exempt employees is extremely difficult for semi-monthly payrolls. 

However, semi-monthly payrolls are the easiest for accounting departments to reconcile company finances, as each month has precisely two paydays. Moreover, because paydays fall on roughly the same dates each month, employees can easily schedule bills around their paychecks.

Monthly

With a monthly payroll schedule, employers pay employees once every month. Each pay period encompasses the entire month.

Employees can expect 12 paydays per year with a monthly payroll schedule, and employers typically schedule paydays toward the end or the beginning of the month. Monthly payroll schedules are the rarest pay frequencies in the U.S.

Pros

  • Monthly tax and benefit deduction reporting is easier than with other payroll schedules.
  • The cost to run only 12 payrolls per year is relatively low.
  • Businesses can schedule their monthly paydays around when they expect their cash infusions.

Cons

  • Certain state laws prohibit or regulate monthly payrolls.
  • Irregular pay periods can make it difficult to calculate overtime hours.
  • It is typically unpopular among employees.
  • New hires may have to wait a month to receive their first paycheck.

When to choose a monthly schedule: Companies needing to drastically reduce how often HR teams process payroll should consider monthly payroll schedules. Commission-based or professional service industries could also benefit, as monthly payroll frequencies mitigate payroll costs and more directly align with client billing practices.

Likewise, if payroll operations are particularly complex — such as managing many employees or international payrolls — Rapoport argues a monthly payroll cadence can be easier for companies to manage and compute.

How do you make a payroll schedule?

When developing your payroll schedule, you must consider a few key factors. Jennifer Kraszewski, vice president of human resources at Paycom, notes that these aspects include “federal and state laws, the types of workers employed (full-time vs. part-time), their unique preferences based on their needs, and the payroll resources available.”

Although payroll cadences differ from company to company, software can make deciding on and executing your best payroll schedule relatively easy. As Kraszewski explains, “the right HR tech allows companies to execute a pay schedule that is on time and error-free, which increases employee engagement and motivation.” But deciding on the right payroll or HR software for your business is another matter entirely.

If you’re unsure where to start your payroll software journey, our payroll shortlists can help you find the perfect solution to fit your specific needs:

  • Top Payroll Software: Our overall favorites in today’s payroll software market, addressing your top concerns.
  • Best Free Payroll Software: Our most affordable picks for small businesses just starting out.
  • Top Global Payroll Solutions: The best payroll solutions to handle your international teams, whether you’re a small business or a large enterprise.
  • Top HRIS Systems: Our favorite all-in-one human resources information systems (HRIS) to help you manage both payroll and other core HR functions.

However, if you’re still unsure, browse our complete list of solutions in our Payroll Software Guide. While you’re at it, check out our walkthrough of the best global payroll solutions:


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1 Deel

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