Accounting

Which Payroll Schedule Is Best?

Mar 15, 2021 • 4 min read
Business owner looks at payroll check
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      Of all the decisions you need to make as a business owner, the payroll schedule might seem low on your priorities. While you might be more concerned with how you’re going to generate enough revenue to pay your employees in the first place, the payroll schedule is actually a critical decision. Not only can it dictate when your employees are paid, it also impacts your accounting, payment processing, and cash flow.

      Consider the most common payroll schedules—and their pros and cons—before you decide which option is best.  

      The Weekly Payroll Schedule

      The weekly payroll schedule pays your employees every 7 days, usually on a Friday or Monday, depending on the company and processing tools used. This timeframe means employers need to cut a total of 52 checks over the course of the year. 

      This payment option isn’t particularly popular with employers, who have to dedicate a considerable amount of time to payroll every week. It also requires paying more fees associated with distributing checks. 

      However, the benefit of this payment schedule is extended mostly to employees, who enjoy frequent payments. This option is often used in industries with high turnover rates (like fast-food chains) and low-wage industries where the workers need a weekly paycheck to cover basic costs. 

      Weekly payroll systems are also ideal for companies where the number of employee hours worked fluctuates significantly. For example, if an employee works 10 hours 1 week and 30 hours the next, it may be easier for a business to issue checks 1 week at a time. 

      The Bi-Weekly Payroll Schedule

      A bi-weekly payroll schedule cuts employee checks every 2 weeks, starting at the top of the year. There are times when checks will get cut at the first of the month and times when checks are issued at the end. 

      Bi-weekly payroll options are often preferred by companies because there are lower processing costs and more time to handle other issues related to accounting and payroll. However, there may be more mistakes and adjustments needed as accounting teams have to make sure the hours over a 2-week period are correct. 

      The bi-weekly system is particularly popular with companies that offer overtime work and those that follow a standard 40-hour, 5-day workweek. Accountants will review the same amount of days each time over the same Monday through Friday (or Sunday) period. This creates a sense of consistency that both employees and accountants appreciate.   

      The Semi-Weekly Payroll Schedule

      Another option for payroll is semi-weekly—which might seem like bi-weekly at first, but there’s a distinct difference. A semi-weekly system pays employees on 2 set days of the month—the 1st and the 15th, for example. 

      Regardless of the month or day of the week, employees will receive their checks at this time. This means that 1 month an employee will get paid on a Wednesday and the next on a Monday. The days in between are close to 2 weeks, which means the spread is similar to the bi-weekly process, except it more formally adheres to the check-issue dates. 

      With a semi-weekly system, companies only have to cut 24 rounds of checks per year (12 months of 2 checks). This is less frequently than a bi-weekly system, where the occasional 5-week month means employers will need to cut 26 rounds of checks total (52 weeks in a year divided by 2).    

      This option can prove tricky for accountants who are trying to track hourly workers and overtime. With this process, a pay period might start mid-week, and the period could run longer through the end of the month. For example, the gap between February 15 and March 1 is only 13 days, while the gap from March 15 to April 1 is 16 days. 

      Your team will have to work harder to process the checks for some months, and employees will have to wait longer between checks as well.    

      The Monthly Payroll Schedule

      The monthly payroll schedule means employees only receive their paychecks 12 times per year, either at the start or the end of the month. While this is an affordable option for your company and can cut your payroll processing costs in half, it’s usually unpopular with employees. New workers will have to wait a month to get their first paychecks—something few people can afford. 

      Your team members will also need to be more strategic in how they balance their bills and stretch their income because they won’t see another check for 30 days. From an employer’s standpoint, some employees might seek work elsewhere if they can’t make the monthly payroll schedule work for them. 

      Choose the Best Payroll Schedule for Your Needs

      To determine the best payroll schedule for your business, weigh the costs of cutting checks alongside the needs of your employees. The top money-saving option might have negative consequences related to turnover and employee recruitment. Focus on the best payroll process to keep your workers engaged without driving up your processing costs. A bi-weekly or semi-weekly schedule should keep your business covered in most cases.

      With Lendio’s Gusto integration, payroll has never been easier. Enjoy the luxury of a simple payroll process and having your payroll taxes automatically calculated, filed, and paid.

      About the author
      Derek Miller

      Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.

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