A decision that every business owner setting up their employee payroll with a payroll company must make is one that pertains to payroll scheduling or how often everyone will get paid.
Payroll scheduling is an important part of every payroll system and a decision that can affect everything from talent recruitment to employee satisfaction.
It is a business detail that must also comply with state and local payroll laws and can affect income tax decisions as well.
Before randomly assuming once-weekly or twice-monthly employee payroll is sufficient for any company, business owners should understand the different payroll schedules and how they affect employees, and their companies.
What Is The Difference Between A Pay Date and a Pay Period?
Primarily, it is essential for employers and employees both to understand the difference between a payroll system pay period and a pay date, two terms that frequently get confused.
The pay period is the span of days that the payroll amount includes, which is cut off by a certain date to leave time for the payroll company to configure and issue payroll.
The payroll date is the date on which the payment is issued and available to employees.
What Are The Different Payroll Schedules?
There are four schedules that payroll systems customarily use for configuring pay and deductions, then issuing payments to employees:
- Weekly Pay - Employee payroll is issued every week on the same day.
- Bi-Weekly Pay - Payroll is issued every two weeks on the same day bi-weekly day.
- Monthly Pay - Payroll is issued once monthly on the same day of the month.
- Semi-Monthly Pay - Payroll is issued twice monthly on the same two days of the month.
How Do You Decide Which Payroll System Is Best?
Deciding which of these options is the best for any business owner’s employee payroll requires consideration of factors such as state laws, as some states require weekly pay and overtime pay calculation, as federal law requires overtime to be calculated weekly.
Payroll system scheduling must also incorporate a system for tracking and paying benefits such as PTO, healthcare payments, and more.
Additionally, more or fewer tasks managed by a payroll company can affect the cost to the business owner.
Adding It All Up – Pardon the Pun!
Between the four schedules, monthly employee payroll is usually preferred for the employer since it reduces payroll company costs and it might be a common way to pay independent contractors; however, it is not a favorite of employees and can make hiring new people a challenge.
Conversely, while employees prefer weekly pay, this involves companies paying more to their payroll system for more frequent services.
Depending on the size of the company, company culture, type of employees, and other accounting details, company owners must find the payroll schedule that works best for everyone.