Which Payroll Schedule Will Work Best for Your Business?
May 2, 2018
Whether we’re talking about someone on an hourly schedule or someone on your management team, pay day is a big deal. That being said, is weekly, biweekly, or semi-monthly the best option? Before picking one, it’s important to consider the pros and cons of each. After all, your decision will have an impact on each and every employee, and the all important pay day.
Semi-Monthly versus Biweekly
The difference between semi-monthly and biweekly payroll, starts with the fact that the semi-monthly is paid 24 times per year, and the biweekly is paid 26 times per year. A semi-monthly payroll is paid twice a month, usually on the 1st and 15th, or the 15th and 30th. Keep in mind that your accountant probably runs monthly reports, not weekly reports, which is why they may prefer semi-monthly pay periods, since the last paycheck of the month will typically coincide with the end of the month.
From an efficiency perspective, the semimonthly payroll may also be preferable, since there are two fewer payroll periods per year to prepare. Benefits also typically run on a monthly basis, which means voluntary deductions for things like healthcare are easier.
For companies paying their employees biweekly, two months out of the year will have three pay periods instead of two. That means your accountant must have payroll expense accruals so costs are recognized in the month the compensation was paid.
From the employee perspective, the biweekly payroll is also preferable, since employees become accustomed to being paid approximately twice each month, and then receive two extra "free" paychecks each year. Furthermore, it is often easier for employees to budget when their pay day falls every other week.
Salaried employees don’t earn overtime, but hourly employees do. That’s another reason hourly employees prefer biweekly pay periods. Hourly employees may also have inconsistent weekly work schedules, which can include overtime. For a biweekly pay schedule, overtime is easy to calculate. It’s a little more difficult on a semi-monthly schedule.
Weekly payroll is not a popular option for many companies, and one of the most main reasons for that is the time and cost associated with preparation. However, it is an attractive option for employees, especially those in the trades. Just like hourly employees prefer bi-weekly pay periods, many like weekly periods even more because it can better match their cash flow needs.
Bottom line, there is a divide on company ease and employee wants. Biweekly or semi-monthly options are more convenient for employers, but weekly pay tends to be more appealing to employees who want their money as soon as they earn it. At Spectrum Payroll, our team of payroll specialists can look at your unique situation and help you determine the schedule that will work best for you. As your business needs change and grow, we can save you time and money, and allow you to let go of some of the details and focus on what you do best, building your business.