Let’s take a look at the four most common payroll schedules and explore how you can choose the best one for your business:
Common Payroll Schedules
- Weekly payroll works well for hourly workers and industries like construction or hospitality, where hours vary. Employees enjoy frequent pay, which boosts morale and retention. It also simplifies overtime calculations. However, it’s more costly and time-consuming to process, with frequent tax filings required.
- Biweekly payroll is one of the most common schedules in the U.S., offering a good balance between pay frequency and administrative effort. Employees get 26 paychecks a year, which feels frequent and suits both hourly and salaried staff. Still, budgeting can be tricky during months with three pay periods, and overtime tracking may require more attention.
- Semi-monthly payroll pays employees twice a month, often on set dates like the 1st and 15th. This schedule aligns well with accounting cycles and can reduce processing costs, making it a good fit for salaried employees. However, it may be less ideal for hourly staff due to inconsistent work schedules and less straightforward timekeeping.
- Monthly payroll is the simplest and most cost-effective to administer and can help with long-term financial planning. However, it’s usually not a great fit for hourly employees or industries with high turnover. The infrequent pay schedule can make budgeting difficult for employees and can complicate time tracking.
Selecting the right payroll schedule isn’t one-size-fits-all. Here are 7 key factors to consider:
1. Cash Flow & Budgeting. It’s important to ask yourself how often your business can comfortably afford to run payroll. Weekly payrolls require a steady and reliable cash flow since you’re paying employees more frequently. On the other hand, less frequent payrolls offer more breathing room and can help with long-term financial planning, but may not suit every business or workforce.
2. Employee Type & Impact. Your employees can greatly influence which payroll schedule works best. Hourly workers often prefer weekly or biweekly pay because it helps them manage their day-to-day expenses more easily. Salaried employees, on the other hand, are usually comfortable with semi-monthly or monthly schedules. It’s also important to consider how payroll frequency affects employee retention—some employees rely on regular weekly paychecks to stay financially stable, and offering a schedule that meets their needs can improve satisfaction and reduce turnover.
3. Industry Norms. Standard practices within your industry play a key role in choosing a payroll schedule. For example, most construction companies pay their workers weekly due to the nature of the work and fluctuating hours. Aligning your payroll schedule with what’s typical in your industry can make your business more attractive to potential hires and can help keep current employees satisfied.
4. Administrative Resources. Running payroll more frequently means spending more time and money on processing, tax filings, and staying compliant with regulations. That’s why it’s important to consider your team’s capacity. If handling payroll is becoming a burden, partnering with a reliable provider can make a big difference. BankFive offers dependable payroll solutions designed to simplify the process and reduce administrative stress.
5. Compliance & Legal Requirements. Your business’s compliance with state and federal labor laws is essential when choosing a payroll schedule. Some states have specific laws about how often employees must be paid, and failing to follow them can lead to penalties. For example, in Massachusetts, hourly employees must be paid weekly or biweekly. In Rhode Island, most employers are required to pay hourly employees weekly, though there is more flexibility for salaried employees, who may be paid less frequently under certain conditions. To avoid compliance issues, it’s important to review your local labor laws and ensure your payroll schedule meets all legal requirements.
6. Overtime & Time Tracking. When it comes to overtime and time tracking, weekly or biweekly payroll schedules are generally easier to manage for hourly employees. These schedules align more closely with standard workweeks, making it simpler to calculate overtime accurately. In contrast, semi-monthly or monthly schedules can complicate overtime tracking, especially when the pay period doesn’t match up with the actual workweeks, leading to potential errors or delays in compensation.
7. Payroll Provider Compatibility. Your payroll provider's ability to support your desired schedule is another important factor to consider. Not all systems handle every frequency equally well, and selecting one that your provider can manage efficiently and accurately is key to avoiding errors and delays. Make sure your payroll solution is equipped to handle your preferred schedule smoothly, so your team gets paid on time and your business stays compliant.
Choosing the right payroll schedule is more than just a logical decision, it’s a strategic one that can impact your cash flow, employee satisfaction, and operational efficiency. By weighing your business’s financial capacity, workforce needs, and compliance obligations, you can select a payroll frequency that supports both your team and your bottom line. If you’re a business owner in Massachusetts or Rhode Island looking to simplify payroll and reduce administrative stress, learn more about BankFive’s payroll solutions today.