Pay Frequency: Which Is Best For Your Business?
Whether you’re just adding employees for the first time or there’s a shift in the type of workers you employ, you may be wondering how often you should pay your employees. There are several different pay frequency options that may all have certain pros and cons for your business, which can make it challenging to know what’s the best way to schedule your payroll.
Complete Payroll Solutions is an outsourced payroll provider to more than 8,000 companies. We have been helping businesses for over 18 years set up and run payroll, including deciding on how often they should pay employees.
To help you understand your options and why you may want to choose one pay frequency over another, here we’ll discuss:
- Pay frequency options
- State law requirements
- The impact on costs
- How to change pay frequency
After reading this article, you’ll understand how to strategically align your pay schedule to meet your business’ needs.
What are my pay frequency options?
Pay frequency simply means how often you pay employees. There are 4 general options for the time between a worker’s paydays:
Paying employees once every week for 52 weeks is common for hourly wage earners such as restaurant employees, shift workers, laborers, and skilled tradespeople. With this approach, the advantage to your employees is that they’ll get paid more often. Additionally, funding payroll will be easier for your business since you’ll only need to cover one week’s worth of time. But from an administrative perspective, it could be more work for you because you’ll need to run accurate and on-time payroll every week.
With biweekly payroll, you pay your workers every other week on the same day, for example, on a Friday. Biweekly is the most common pay frequency according to the Bureau of Labor Statistics and is typical for companies that have a mix of hourly and salaried workers. For instance, biweekly payroll is often used in office environments, healthcare, and high tech. The upside of biweekly payroll for employers is that you’ll only have to manage payroll half as often as you would with weekly payroll. For new hires, however, depending on when they join the company, they may have to wait 3 weeks to receive their first paycheck.
When you choose to pay your employees twice per month, or semi-monthly, you’ll pay them on two specific dates, such as the 1st and 15th of the month. That means an employee’s pay date may fall on a weekend. When that happens, Saturday and Sunday pay dates are typically moved to the prior Friday; however, moving check dates, especially when there’s a holiday, can make tracking pay dates tricky on employers and employees. Semi-monthly payroll is most often reserved for executives and exempt hourly workers.
In some cases, you may opt to pay your workers just once a month like the first day or the last day. While these can make it less burdensome on you, it can make it challenging for employees to plan and budget when they only receive one paycheck a month.
Are there state law requirements for pay frequency?
While there is no federal law that dictates how often you pay employees, some states have specific requirements. For example, in Maine, you must pay employees at regular intervals that don’t exceed 16 days. In that case, you wouldn’t be able to pay employees monthly.
In New Hampshire, employees must be paid weekly or biweekly unless you get written approval to pay on a monthly or semi-monthly basis by the state Department of Labor. New Hampshire provides various ways to request a different pay frequency.
In addition, the type of workers you have may trigger state law requirements. For example, in Massachusetts, hourly workers must be paid every week or every other week (biweekly).
The US Department of Labor has a convenient chart that lists each state’s pay frequency requirements so be sure to consult or contact your local labor department as you’re deciding on how often to pay your employees.
Does my pay frequency impact my costs?
Whether you run payroll yourself or outsource it, there’s time, labor and costs involved. For example, a payroll company will typically charge a base fee and a fee for each employee every pay period. Therefore, you may save on the cost of payroll processing by choosing a frequency other than weekly. In fact, if you pay your employees biweekly instead of weekly, you’ll save about 35-40% on the cost of payroll processing.
In addition, if you pay employees with a paper check, a less frequent payroll choice will also save you on the cost of shipping.
How does pay frequency affect my payroll taxes?
As an employer, you’re responsible for paying payroll taxes, including your share of Social Security and Medicare taxes as well as federal unemployment tax and state unemployment tax. Your tax liability is based on a percentage of each employee’s wages – not on how often they’re paid. So you won’t pay more or less in payroll taxes depending on the pay frequency you choose.
Can I change from a weekly to biweekly payroll?
If you’re thinking about changing from one payroll schedule to another, you’ll want to make sure you follow any applicable state laws so check your requirements. For example, your state may require advance written notice. In Rhode Island, notice of any changes in a scheduled payday must be given to employees at least 3 pay periods in advance of the change.
Once you decide to switch pay frequency, you’ll want to put a plan in place so that you roll it out smoothly to employees. Consider the following steps:
- Assign a team to oversee the transition and ensure it’s handled properly
- Select a date to implement the change, such as the end of the fiscal year or end of a quarter
- Give employees plenty of advance notice especially if you are decreasing their pay frequency so they can plan
How to Get Help With Your Pay Frequency Decisions
Pay frequency is an important decision that can have a big impact on your employee morale, costs, and compliance. If you’re looking for assistance in this strategic choice, an outsourced payroll provider like Complete Payroll Solutions can give you insight and guidance to help you decide.
No matter what pay schedule you choose, our payroll solutions can help you save valuable time on payroll processing so you can focus on your core business. To see if one of our payroll options may be right for you, read the article on our available packages.