How to choose the best payroll schedule for your company?

Apr 2, 2017 by

How to choose the best payroll schedule for your company?

Whether you have a small, medium or big-sized business, it is important to choose a payroll schedule that is best for your employees and your company. When making that choice, it is important to consider the cost. The more frequent you pay your employees the more costly the process becomes. But a balance should be reached where the cost doesn’t overshadow the needs and preferences of your employees. The most common payroll frequencies are semi-monthly (twice a month), biweekly (every two weeks) and weekly. Each of these pay schedules has pros and cons. Below we will look at the difference between a semi-monthly and biweekly schedule, because they are the ones most common.


Semi-monthly vs. biweekly payroll. Which one is best?

At first glance, these two payment schedules may seem similar. After all, there are only two extra paychecks for biweekly -26- as compared to semi-monthly-24-, but there are pros and cons to both methods and some differences worth noting.

The accounting department of your company is likely to prefer semi-monthly payments. The reports that the accountant runs are monthly, and the last paycheck will coincide with the end of the month. The deductions are straight forward in that case. In the biweekly method, two months in a year will have three pay periods and not two. This is extra work for your accountant.

Additionally, in semi-monthly payments the deductions of healthcare of your employees and the benefits are easier to deduce. It gets trickier with biweekly, since you need to manage the deductions by calculating the total number of annual day periods. This number can be 26 pay periods or 27, depending on the year.

It is mainly hourly employees who prefer bi-weekly pay periods. This payment schedule is better for calculating overtime. If an hourly employee has an inconsistent work schedule that may include overtime, then semi-monthly schedule may make these calculations more complicated. If the extra hours are between two different semi-monthly periods, then adjustments should be made and it may get confusing at times.


What about the weekly schedule ?

The weekly payroll is not so popular, but it can be found in some trade companies such as construction and plumbing industries. The main disadvantage of weekly schedule is the cost in involves. Each time you pay dozens of employees the fees can add up, making the whole process more costly than it need be. It also takes extra unnecessary work from your team of administrators, if you have any.

The weekly payroll can be attractive to your hourly employees, and they may prefer it more than the bi-weekly. It best matches the cash flow that an hourly employee needs, especially if they have irregular working schedules with additional overtime. The weekly payroll may be a better reflection of the compensations that an hourly employee earns, if they add overtime regularly.

Choosing the best schedule is a matter of balancing the cost, the benefits to the administrators and accountant, and the benefits and needs of your employees. The semi-monthly and semi-weekly remain the most popular and the choice should take into account all the different factors.

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