Imagine you have started your small payroll business. You have hired employees who will be working in accordance to a payroll schedule. But how would you know which payroll schedule is best for employees? In this blog, we will explore about payroll frequency and the pons and cons of four payroll schedules. From there, you will be able to decide which payroll option fits best for your business.
What is Payroll Frequency?
Payroll frequency is a scheduled process by which you often pay your employees. It is necessary for an employer to act in accordance with a payroll schedule so that the employees know the exact day of getting paid. Just like there are different ways to cook Maggie, there is more than one payroll schedule to consider. We will be discussing only the four most common methods of payroll frequency. This blog will also guide you to the best suitable pay period for your business. Here we go.
Like any small business owner, I experienced the pressures of building a company from the ground up - developing a business plan, balancing the books, meeting payroll and building a customer base -Gavin Newsom
Four periods of Payroll Frequency
We will discuss the pros and cons of each method to help you decide the best match for your company.
In this payroll period, an employee is paid on the same day, every week. A weekly payroll period includes 52 payrolls per year. Usually, the most common day for weekly payout is Friday. However, it is not a rule. The payday can be any day of the week. The working hours fluctuate on a week-to-week basis, this method is perfect for hourly workers.
- Employees get their overtime pay sooner.
- Paydays are more in the weekly period for employees.
- Calculation of overtime is convenient.
- It is a time-consuming payroll structure because it requires 24/7 attention each week.
- More costly because there are 52 payrolls per year that cause an increase in your expenses.
It is similar to the weekly schedule. In a bi-weekly schedule, employees get their pay on a specific day of the week. The main difference is that in a bi-weekly payroll structure, payroll is processed every other week which results in 26, sometimes 27 per year. For the companies which follow this payroll structure, the payday could be every other Friday.
- Due to 26 payrolls per year, the bi-weekly schedule saves your money.
- Less number of payrolls act as a time-saver. You can get time for other assignments.
- There are complications in the monthly budget because of fluctuations in number of days every month.
- Employees get their paychecks on different dates, causing problem for the employees to keep a balance in their tasks.
Be prepared for the creation of an intrusive bureaucracy to police the ordinance by examining the books and payroll ledgers of businesses. -Randy Hamilton
This payroll schedule is a bit similar to the Bi-weekly schedule, the only difference is that paydays are connected to two specific dates of the month. The total payrolls will be 24 per year. Semi-monthly refers to ‘every half month’. Employers can pay checks either on 1st and 15th or 15th and 30th/31st. If weekend falls on these days, the employer can deliver checks either on Friday before weekend, or on Monday.
- Paying bills is easier for employees.
- No complications are due to leap year.
- It is simpler to handle monthly bookkeeping services.
- You have to make adjustments if payday is on the weekend or holiday.
- This method is prone to employees’ complaints.
- Calculations of overtime are not easier for hourly employees.
As the name implies, the payroll is processed only once a month. So the total number of payrolls is 12 per year. The specific date of payday can vary, for instance, you can choose to pay your employees every last Thursday. A monthly payroll schedule is the least attractive pay period for employees. The main reason is that employees have to wait for a whole month to get paid.
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- It is considered to be the least expensive payroll option.
- It fits perfectly with the monthly taxes and deductions
- Unattractive payroll option for employees due to time gap causing financial stress.
- Unreliable due to objection of state laws.
The Bottom Line
When it comes to choosing the optimal payroll schedule, it is evident that not a single payroll period completely fits all problems. Each of the payroll frequencies has its own advantages and disadvantages. The only thing that can help you make the final decision is by keeping in mind your employee's ultimate satisfaction, your province’s frequency requirements, and last but not least your business needs. When it comes to some legal advice, you can completely trust Yogi & Associates as this is one of the most reliable taxation firms in Mississauga. So feel free to contact us anytime.