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Date Posted: 4/29/2014

The Payroll Frequency Debate

 
 
By Stefan Schumacher, editor of The Payroll Blog

Getting paid more often is typically preferred by employees. After all, who wants to wait longer for their next check? Pay frequency is generally regulated at the state level and may be specific to non-exempt or hourly employees in some states. Requirements may also vary by industry. But where lawful, many employers choose a bi-weekly payroll run as opposed to a monthly payroll. However, paying employees on a bi-weekly basis can create some issues and complications.

First, let’s make sure we understand how a bi-weekly payroll works. On a bi-weekly payroll, employees receive their paycheck on the same day of the week, every two weeks, resulting in 26 checks per year. Employees will, of course, receive the same annual gross dollar amount regardless of how often they’re paid, but the bi-weekly method doesn’t always result in two checks per month; you may have to do three payroll runs in a given month. 

As an alternative, some employers choose a semi-monthly payroll where permitted under state law, issuing 24 checks per year, with a slightly larger gross dollar amount per check, than in the bi-weekly scenario. 

While employees may like to be paid more often, getting two checks a month (semi-monthly) may make it easier for them to plan their budgets. 

Of course, some employers may be able to run payroll only once per month or conversely, on a weekly basis. Whatever the frequency chosen or required, be very clear with employees about exactly when they’re getting paid and comply with applicable state and local laws to provide notice of paydays. This can help minimize any confusion by employees about when they will receive their paycheck, which could lead to a drop in employee morale or distrust of the company leadership. People depend greatly on receiving their checks on a specific day to pay bills, plan trips, schedule car maintenance and any number of other scenarios. 

Payroll frequency (how often you run payroll and your employees are paid) could also have an impact on the cost of your payroll service. However, the difference may be fairly minimal. Make sure your payroll provider can walk you through the differences, advantages and disadvantages. Your accounting department or accountant will thank you, and so will your employees.

 
 


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