When starting a new company, you need to decide how often to run payroll. When choosing a pay schedule company, there are a few things to consider, such as your location, employees earning overtime, handling payroll, and the overall costs. Here are some of the commonly used payroll schedules in the U.S to consider.
It refers to a combination of payment date and pays period. The latter determines how often employees will receive a paycheck and is also referred to as pay frequency. The pay schedule you choose will determine the number of pay periods in a year.
On the other hand, pay date refers to the actual date when you pay your employees. Note that the end of a pay period and the pay date might not always fall on the same date. For instance, your pay period might end on a Wednesday, but the pay date might be the following Friday.
How Does A Pay Schedule Work?
As an employer, you need to set up a regular pay period to ensure that your employees receive consistent paychecks. Most companies choose a payment schedule depending on the needs of the business. However, labor laws govern the minimum consistency, and all employers must comply with these regulations. Therefore, before choosing a pay schedule, you need to know how often state regulations require employers to process payroll.
Types Of Pay Schedules And How To Choose The Best One
The most common types of payment schedules are monthly, semi-monthly, bi-weekly, and weekly. A year is divided into 12 months, 52 weeks, or 365 days. Therefore, you should be able to find a specific pay schedule for your payroll effortlessly. Some businesses prefer weekly payouts and choose to pay once a week or once every other week.
Other companies choose a semi-monthly pay schedule where they pay their employees twice a month, once in the middle and once at the end of the month. A monthly pay schedule might not be common, but it works perfectly for most companies.
- Weekly Pay Schedule
Here, employees are paid once every week. The paycheck includes the total number of hours worked that week. Most companies using this pay schedule prefer to pay people on Friday since it’s the last weekday, but it can be any day of the week. Also, most of the businesses in the manufacturing, construction, and restaurant business choose this payment schedule.
- Biweekly Pay Schedule
A biweekly pay schedule means that payroll is done once every two weeks or every other week. Employees will be paid for two workweeks. For most of the months of the year, employees will have two paydays in a month. However, in 3 months in a year (depending on the year), employees will have three biweekly paydays.
Biweekly is the most common pay schedule for most U.S companies, where most companies pay their employees every two weeks. Most of the companies in healthcare, education, hospitality, leisure, and IT niches follow this pay schedule.
- Semi-Monthly Pay Schedule
It is often confused as a biweekly pay schedule. However, it refers to employees being paid twice every month. Here, companies opt for payment in the middle of the month and at the end of the month. If those two days fall on the weekend, payroll will be processed on the closest weekday. The pay period can either be 14-16 days, depending on the number of days in that particular month. This pay schedule is mostly used by companies in the IT sector, financial and professional niche.
- Monthly Pay Schedule
Here, payroll is processed once every month. It is not expected as the other pay schedules. As such, there are only 12 pay dates in a year. Most companies using this pay schedules pay their employees on the last Friday of every month. Other companies under this pay schedule opt to pay on the last day of every month, and if it falls on a weekend, the paychecks will be issued on the last weekday before the weekend.
What Is A Federal Payday?
Regardless of their pay scale, employees in the Federal government are paid on the same day. The federal government uses a biweekly pay schedule where a pay period includes 80 hours of work. Therefore, if the employee works less than 80 hours for a specific pay period, they will be paid at a pro-rated rate. It happens mostly for those who take unpaid leave or work on an hourly basis. Pay periods usually start on Sunday and run until Saturday at midnight.
At the same time the payment is issued, the employees will also accrue sick and annual leave. If they work less than 80 hours for a pay period, any paid leave accrued will be pro-rated. Payday is usually on Wednesday morning. However, for most people, the paycheck is received on Thursday morning, while others accept it on Wednesday afternoon.
Employees who bank with a federal credit union or any other bank that works with the federal government will receive their money on a Wednesday afternoon. Payments are usually issued two weeks after the end of the pay period. Employees will be hired at the start of a pay period, so new employees will work for four weeks before getting their first paycheck. Also, they will not receive any payment for overtime work.