Deciding when and how to pay your employees is an important decision. Payment is what motivates your employees to work, and the payroll schedule you choose for them will determine their moral, work quality, and whether they decide to work for you at all. Understanding the various payment schedules that exist will make it easier to select one which is well suited for your business.
Common Payroll Schedules
Common payment schedules can be broken down into four types, which are monthly, semi-monthly, every two weeks and weekly. Monthly means that you pay your employees once a month, semi-monthly means the employees are paid twice a month typically on the 1st and 15th, bi-weekly means payment every two weeks, and weekly means that you pay once a week, usually on Friday which is the final day of the work week.
Advantages and Disadvantages of Different Payroll Schedules
Weekly payment is the most popular among hourly employees. This schedule provides the highest frequency of payments and is the best way to boost their morale. It removes the stress of having to worry about waiting two weeks or longer in order to pay bills, and the payroll department will be expected to perform fifty-two payouts annually.
Bi-weekly payments will require employers to pay their employees for eighty hours of work. This payment schedule doesn’t provide the same level of morale as the weekly payment schedule unless it is provided with other benefits, and this payroll schedule will also save the payroll department money while providing them with better processing time.
Semi-monthly payment works best with salaried workers. Paying employees two times a month is considerably more cost effective than weekly or bi-weekly, and it also requires less processing time. A semi-monthly payroll schedule means that you will have a total of twenty four pay periods each year, and some employees might find it harder to adapt to it.
Monthly payments are the least popular among employees (although it is widely practiced for permanent employees) as it requires them to wait the longest in order to get paid. It can be particularly demoralizing to new hires who are paid hourly, who may have little money to cover their bills for the 30 days they’ll have to wait to receive payment. While this payroll schedule will save the payroll department the most money, it may lead to high turnover if your business operates mainly with hourly employees. Depending on where your business is located, there may even be laws that prevent you from making employees wait this long for payment, so perform your due diligence before enacting this pay schedule.
Payroll Schedule Tips
Typically, the lower the pay you give your employees, the more frequently they should be paid. Though monthly payment is not preferred based on employee surveys, but can be effective in cases where it is legal and you have a large team of salaried workers that would put excessive strain on your payroll department if you tried to schedule other types of payroll schedules.