There’s no one pay period that’s best for all employers. The easiest pay period for your business depends on your workers and how you pay them.
With that said, there’s probably going to be one that works better for your business and its structure than another. Choosing the right one for your company and its employees from the start is one of the best ways to simplify compensation practices in the long run.
Types of Pay Periods At a Glance
There are four common types of pay periods based on your employee pay frequency:
- Semimonthly: Semimonthly pay periods include two weeks, with paychecks paid on the same two dates per month. Companies often choose the 1st and 15th, but some also use the 14th and 28th or the 15th and 30th/last day of the month.
- Biweekly: Bi-weekly pay periods include two weeks. Employees get paid every other week on the same day of the week, like a Wednesday or Friday.
- Weekly: Weekly pay periods include all worked time for just one week and allow employees to get paid weekly on the same day each week.
- Monthly: Monthly pay periods include all pay for a full month. Employees on a monthly pay schedule get paid just once a month on the same date each month, like the 15th.
When to Use A Semimonthly Pay Period
If your company has mostly salaried employees, consider using a semimonthly pay period for them.
A semimonthly pay period offers two pay dates per month, which don’t vary between months. So, if employees get paid in January on the 1st and 15th, they’ll also get paid on the 1st and 15th in February, March, and every following month.
Because the pay dates don’t change with a semimonthly schedule, the days included in each pay period vary, reliant upon cut-off dates in the pay period.
For example, January’s pay period ending on the 14th and paid on the 15th might include just one full Monday-Friday week, one day of another week, and four days of another week. Then, February’s pay period could include two full Monday-Friday weeks.
Salaried employees don’t work on a typical week-by-week schedule by the hour and, therefore, aren’t eligible for overtime pay. Hourly and overtime pay can make semimonthly pay periods more complicated because weekly cut-offs within a pay period can vary with each pay period.
However, the day on which a pay period cuts off a week doesn’t have the same impact on salaried employees.
A semimonthly pay schedule will always include two pay periods per month or 24 pay periods a year. Some employers prefer this to, say, a biweekly pay period, which works out to two additional pay periods per year.
On the other hand, pay dates may need an occasional shuffle to account for weekends or holidays. For example, a pay date of the 1st would consistently fall on New Year’s Day, a bank holiday. You’ll need to decide whether to change the date each year or pay your employees a day late or early.
Although paychecks will usually arrive on the same dates each month, some employees may not appreciate when it needs to change to accommodate a holiday.
In short, avoid semimonthly pay for hourly workers to prevent calculation mishaps with regular and overtime hours. If you use semimonthly pay for salaried workers, have a plan in place for pay dates falling on bank holidays.
When to Use A Biweekly Pay Period
A biweekly pay period is best for hourly workers whose pay typically lines up well with a Monday-Friday workweek.
Biweekly pay periods are the most common in the United States, paying employees every other week on the same day of the week. Usually, that day is Friday, but some companies pay on Wednesdays, Mondays, or whatever day it makes sense for them.
Regardless of the day the employer pays, the pay period’s end date is always the same distance from an employee’s payday, ensuring that the same weekdays are always included in each pay period.
For example, say a company pays biweekly on Fridays. To give enough time to run payroll, the company stops each pay period the Monday before payday. So, every payday will have two weeks of work days, always running from Tuesday to Monday.
Thanks to this schedule, employees receiving hourly pay who are eligible for overtime hours will always have the same days included in their pay periods. This can be especially helpful for employees who work the same days each week, like Monday through Friday or Sunday-Tuesday-Thursday schedules, allowing them to budget based on their usual paychecks.
Employees also tend to love biweekly pay. It’s consistent enough to keep their earnings rolling in regularly but spaced out enough to maintain a budget.
The downside of biweekly pay falls on employers. As mentioned, biweekly schedules require two extra payroll runs each year compared with semimonthly pay. It’s not a huge difference, but it’s still two additional times you need to run payroll.
Plus, some months have more pay periods than others because of how their weeks fall, requiring employers to think ahead about budgeting for those months.
If your company is a newer business that’s still trying to work out some kinks in its payroll budget, those extra pay periods could be an issue. In this case, using a pay schedule with the same number of pay periods every year, like semimonthly or weekly, might be best.
When to Use A Weekly Pay Period
Weekly pay periods aren’t common, but you might consider using them if you have a small business consisting of hourly employees, especially if they tend to work overtime.
Weekly pay periods always include seven days, usually running from Sunday through Saturday to include a typical workweek. Then, employees get their paychecks on their set pay date the following week.
This week-long schedule makes it easy for employers to calculate each employee’s hours and eligible overtime pay because the same number of days are always included in each payroll calculation.
Employees like the frequency of weekly pay, as it helps replenish their bank accounts consistently. The drawback is that paychecks are smaller each time, and some workers like seeing larger sums, even if that means waiting a little longer.
Medium to large businesses usually stay away from weekly pay periods, and rightfully so.
That’s because weekly pay periods require employers to run payroll 52 times yearly, complicating things for larger employers. On the other hand, businesses with 10 or fewer employees could probably handle it just fine, especially when reliable payroll software is used.
When to Use A Monthly Pay Period
I’ll make this one simple: Monthly pay is almost never a good idea.
Companies offering monthly professional services sometimes use it, aligning paychecks with the company’s typical cash flow. But it’s more commonly a form of pay used by contractors and freelancers who invoice for their work, not businesses with W-2 employees.
A monthly pay period usually runs for a full month, with a payday the following week after that month or at the end of the following month. Using the latter method, employees won’t see their pay from June until the end of July, for example.
Employers reap the benefit of running payroll only 12 times per year, meaning less admin and reduced costs associated with running payroll. But this convenience for employers is at employees’ expense, who must budget their paycheck for an entire month.
If your company has high earners, monthly pay might work for them. But, most workers prefer more frequent pay schedules, allowing them to enjoy the fruits of their labor soon after they earn it.
Find Your Best Pay Period
In most cases, biweekly or semimonthly pay periods work best for employers and employees. They offer a good balance between convenient pay frequency for employees and just the right amount of payroll runs to keep employers on track through the year.
Cross monthly pay off your list unless you have high earners who don’t mind waiting a month for another paycheck, and only consider weekly pay for a small business with a few employees.
As for semimonthly and biweekly pay, either one can work well for most businesses. However, semimonthly is usually the better fit for salaried workers, while biweekly pay periods fit hourly schedules better.
Consider using both if you have a good mix of hourly and salaried workers, but be sure to use a payroll service to help you with the additional admin.
