Our pay frequency recommendation for companies with primarily salaried employees is semimonthly pay periods. For companies with mostly hourly employees, we recommend biweekly pay periods.
Companies can choose what pay frequency to use for paying their employees. Getting paid every other week, also known as biweekly pay, is the most common pay frequency, but some organizations pay workers weekly, semimonthly, or monthly. The option a company chooses generally depends on the company’s operations and rhythms and what makes the most sense for payroll.
Whether you have a new company and need to determine a pay frequency or you’re considering switching your current company’s payroll procedure to a different schedule, this pay frequency guide can help you understand the pros and cons of each method.
Pay Frequency Options
Pay frequency is the schedule on which a company pays its employees. A company’s pay frequency directly impacts how often an employee gets paid and how many paychecks they get each month and year. The four most common pay frequency options are:
- Weekly: Weekly pay is typically offered to hourly employees on the same day each week. Small businesses that want to provide payroll in smaller chunks might choose this option over others. However, weekly pay also requires more frequent payroll management, which could be difficult for businesses without a dedicated payroll manager or team.
- Biweekly: Biweekly pay comes every other week on a designated day of the week. This popular payment method seems to work well for many employers and employees. It requires less payroll management than weekly while giving workers a steady flow of income broken up into reliable pay periods.
- Semimonthly: Semimonthly pay is distinct from biweekly in that it gives employees their pay on two designated days per month, usually the 1st and 15th or the 15th and 30th. Similar to biweekly pay, semimonthly pay can reduce payroll admin and spread checks out for employees.
- Monthly: Monthly pay is generally the least common form of payroll. This schedule gives employees their pay on the same day every month, like the 1st, 15th, or 30th. While it can save time running payroll, it also requires companies to fund large amounts of payroll at one time. Additionally, employees must wait a full month before receiving another paycheck.
Most payroll software is designed to handle any of these pay frequency options, allowing your company to choose the best method for its employees.
The Real Choice for Pay Frequency is Between Biweekly and Semimonthly
For most companies, the best option is either biweekly or semimonthly pay. Either option splits paychecks into more frequent installments, which can benefit both employers and employees. Still, these options have some drawbacks you should also be aware of.
The Pros and Cons of Biweekly Pay
Biweekly payroll is the most common pay frequency for modern companies. With this option, a specific day of the week, usually Friday, is associated with payroll. Employees know that they get paid every other week on that same day, allowing them to spread out and budget their income, which can be helpful for workers of any salary level.
This option is typically better for companies operating by weeks, such as retail, hospitality, and manufacturing organizations, and companies using mostly hourly employees. Having clear-cut operational weeks makes it easy to calculate biweekly pay, especially when the company calculates an employee’s hours worked week-by-week.
Additionally, calculating overtime can be simpler with biweekly pay compared to semimonthly pay. Again, a week-to-week operation and hour-by-hour accrual can yield straightforward overtime calculations for biweekly payroll.
However, biweekly pay also comes with the disadvantage of some months having three pay periods rather than the usual two. This can complicate payroll for companies during these offbeat months, and it could complicate the process of budgeting paychecks for some employees.
The Pros and Cons of Semimonthly Pay
Semimonthly pay can be a good pick for companies operating in months rather than weeks or companies with mostly salaried or monthly commission-based employees. Employees earning a salary rather than hourly pay don’t necessarily work on the same week-by-week basis as hourly employees. Therefore, payroll doesn’t depend on the number of hours worked and won’t rely as much on a clear start and stop for each workweek.
Employers also process payroll a bit less frequently with semimonthly pay. While biweekly pay is always split into 26 increments per year, semimonthly payroll happens just 24 times each year.
Employees may benefit from having their paychecks delivered on the same dates each month, offering reliable pay that they can align with their bills. For instance, an employee who gets paid on the 15th and 30th might use each month’s first paycheck for end-of-the-month bills while the second paycheck goes toward the next month’s early bills.
Perhaps the biggest downside of semimonthly pay is that accounting for weekends and holidays can be challenging. For example, if a typical payday falls on a bank holiday, a company may need to pay employees early to ensure that they can access their funds before the holiday.
Whatever You Do, Steer Clear of Monthly Pay
Although I’m sure a monthly pay frequency can work for some companies, I can equally say with confidence that it isn’t the best choice for most employers.
In my very first salaried job, we had a monthly pay cycle. It was a common pain point within the company, namely for employees. I was an entry-level marketer at the time and was happy to have the job, but I was well aware that many of my colleagues struggled with monthly pay.
Getting paid each month creates somewhat of an illusion for employees. They get a large sum of money on payday, making it easy to overestimate the amount of money they’ll have to last until the next pay period.
However, what usually ends up happening is that money gets spent relatively quickly, leaving employees to wait a while for their next payday. Then, the cycle continues, causing an ebb and flow of money issues that potentially leads to resentment from employees toward their jobs.
Of course, not everyone has issues with budgeting for a whole month. However, as many as 68% of households don’t create a monthly budget for themselves. At my monthly-pay job, even some people who I thought of as relatively financially savvy still found themselves in sticky monetary situations occasionally.
When that company eventually switched to semimonthly payroll, company morale seemed immediately to lift after the first paycheck with the new system.
Based on my personal experience and numerous talks with other employers, I stand by my opinion that monthly pay simply doesn’t consider the needs of employees. With 60% of United States adults living paycheck to paycheck in 2023, it’s more important than ever to get paychecks into their hands reliably and consistently.
That’s why I advocate for biweekly or semimonthly paychecks, which prevent paydays from falling too far apart and interfering with an employee’s livelihood.
Regardless of whether you use semimonthly or biweekly pay periods, be sure to run payroll at least twice a month for your employees. They’ll appreciate the shorter intervals between paychecks, and you could benefit from improved morale and employee satisfaction.
What to Consider When Determining Pay Frequency
Choosing the right pay frequency for your business is an important decision that should include several considerations.
First, think about how your company operates. Does it typically run week-to-week, or do you operate on more of a month-by-month basis? While biweekly can work well for weekly operations, semimonthly pay might be the best option for monthly operations.
Next, consider your payroll resources. Do you have a dedicated payroll department or just one or two people handling most payroll duties? If the latter, biweekly or semimonthly are excellent choices, as they require much less administrative time and costs than weekly pay.
Also, prioritize your employees. What pay frequency do they prefer? Perhaps sending out a survey to gauge interest in different pay frequencies could provide helpful insight to your team.
Finally, keep in mind that states have different laws surrounding pay frequency. While no state mandates a specific pay frequency, several states do have some restrictions regarding pay periods. For example, Arizona requires employers to have at least two pay periods each month, no more than 16 days apart, leaving monthly out of the running as a potential option.