There are several decisions you must make when you hire your first employee. One of them is agreeing on payroll frequency. After all, many things may depend on it, including employee satisfaction, cash flow, and legal compliance.

And if you’re asking yourself what pay frequency is, fret not. We’re about to tell you more about it. You’re probably already aware of it, but maybe you don’t know it by its official term.

Keep reading to learn what pay frequency, options, and how to choose an appropriate payment frequency.

What is payroll frequency?

Pay frequency, or payroll frequency, represents how often you pay an employee. It also means how often you have to run payroll. You can usually choose from four payment frequency options: monthly, semimonthly, biweekly, and weekly. You can test these options using an hourly and salary paycheck calculator to see how they influence your monthly payroll.

Pay frequency defines the number of paychecks someone receives during a year. It influences tax amounts and payment wages. Pay frequency doesn’t influence net pay and annual tax liability, however, because they equal over time.

Pay frequency impacts many aspects of your business. Let’s see how that works:

• Money – When you want to save time and use software for payroll, consider the costs. Some companies prefer to charge based on the monthly payrolls you roll each month, so if you have many employees or pay them frequently, that can be costly for you.
• Time commitment – Let’s say you prefer to run payroll by hand. You will need time to do it, especially when you pay your employees more frequently.
• Payroll cutoff—The pay frequency influences the pay cutoff, which is the date and time you must run payroll for it to be processed by payday.

Pay frequency options

Now that you know what pay frequency is, great! It’s time to examine your options in detail and choose the one that best suits your needs.

Weekly pay frequency

This frequency type means that employees receive their wages each week. That means someone employed by you receives 52 paychecks per year.

Although each paycheck is less money, the employee receives it more frequently than when you employ the other options. It also means that you must run payroll more often.

The US Bureau of Labor Statistics says that over 33% of employees receive weekly paychecks. According to the study, it is the US’s second most popular pay frequency.

Biweekly pay frequency

Employees who receive a paycheck biweekly are paid every other week, which means they receive 26 paychecks each year.

The payment is made on the same day of the week for each period, as agreed. It could be a Friday, a Monday, or any other day the employee and employer agree upon. That means that an employee receives two paychecks per month. Remember that there are two months when employees receive three paychecks per month, so you must make budgetary changes accordingly.

According to the Bureau of Labor Statistics, this is the most popular form of payment. An important reason could be that biweekly payment is a nice balance between a weekly and monthly pay schedule.

Semimonthly pay frequency

This type of pay frequency can be confused with the biweekly type. But there are certain differences between the two. For starters, an employee receives 24 paychecks during a year.

The payment is made on specific dates, and the days may differ. For example, you pay the employee on the 15th and 30th of each month.

Unfortunately, this pay frequency type has drawbacks for employees and employers alike. For example, it can be difficult for them to track the day of the week they receive the payment. Only 19% of employees receive their wages this way because of inconsistent paydays. New hires are challenged to remain without pay for a few weeks depending on the date they start working.

Monthly pay frequency

The least common pay frequency is the one where employees get one paycheck per month. That means they get 12 wages during the year.

The monthly paycheck has the largest amount of money. But it is less frequent than all the other types mentioned. This type of payment frequency can make planning difficult for employees, but simpler for businesses.

Choosing payment frequency – how to do it

Each business can have its pay frequency schedule. When you build your pay schedule, think about the following:

• Pay frequency laws
• Your industry
• Your employees
• The way you run payroll

 

Pay frequency regulations

Federal laws don’t determine or restrict which type of payment you should choose. But, you are required to keep a consistent pay frequency. That means you can’t change it whenever you feel like it.

State laws can bring further information, so be sure to read up on your state laws. Pay frequency requirements by state decide what pay frequency you can or cannot use. For example, a state may require you to pay your employees two or more days per month, meaning you must set up a biweekly or semimonthly pay schedule.

Your industry

Sometimes, your industry determines pay frequency. For some industries, paying weekly is more profitable; for others, it’s monthly.

For example, construction workers prefer to pay employees weekly. By contrast, financial businesses prefer a bimonthly or monthly pay schedule.

Your employees

Your number of employees and how you pay them can influence pay frequency. Do you pay them by the hour or based on a fixed salary?

The type of employees you have can influence your payroll frequency. You may set up different payment schedules for hourly versus salary employees. Remember that that can become confusing when you run the payroll by hand.

Employee size can also determine pay frequency. For example, companies with thousands of employees may prefer a biweekly pay frequency, whereas small businesses may find a weekly or bimonthly pay frequency better.

The way you run payroll

Look at how you run payroll, too. If you do it by hand, keep in mind that shorter pay frequencies, like weekly, require more time and energy because you need to run more payrolls.

With payroll software, you can cut back on the time needed to run payroll. But you can incur additional costs, paying more for weekly payrolls than you would biweekly, semimonthly or monthly pay frequencies.

Conclusion

Now, you have more data to use when determining your pay frequency. Each has benefits and drawbacks, so think carefully before setting up your payroll.

Consider cash flow, employee preference, payroll processing, and legal requirements before choosing.

Clearly communicate the details to employees and keep accurate records to ensure compliance with labor laws and regulations.