This article is part of a larger series on How to Do Payroll.
A pay period is the recurring period of time during which employees work and are paid. Pay periods are fixed and most often occur on a biweekly or semimonthly basis (state laws may require a certain frequency). Some industries follow a specific pay period calendar for certain workers, such as weekly payroll for hourly employees in manufacturing companies.
Given that payroll impacts your business’s cash flow and financial reporting requirements, you must select the pay period that best fits your company’s needs and worker types. Continue reading for a better understanding of what a pay period is and what it means for your small business, and download one of our free pay period calendars that correspond with your business’s pay cycles.
Also, follow along with our pay periods video below:
How Pay Periods Work
Employers set a regular pay period to ensure their employees receive consistent paychecks. While most companies base their pay schedule on the needs of the business, there are labor laws in place that govern the minimum consistency with which these schedules must comply.
Before choosing your pay schedule, it’s important to know how often your state requires employers to process payroll, which we detail in our state payroll guides. Check out your state below:
State Payroll Directory
Employers consider the minimum frequency at which they can legally process payroll—usually monthly—to set a regular pay schedule. Remember, every pay schedule includes start and end dates for time worked and a payday on which employees receive their paychecks. The payday varies depending on the employer; some designate the payday to be the last date of every pay period, while others may opt to pay a week after the pay period ends.
Types of Pay Periods & How to Choose
A year can be divided into 52 weeks, 365 days, or 12 months, which means there are numerous schedules you can use for your payroll. Some businesses are more concerned with weekly payouts and opt to pay once a week or every other week. Others divide each month in half and choose to pay in the middle and at the end. Additionally, although not as frequent, a monthly pay schedule works better for some companies.
Here are some factors you should consider when determining your pay schedule.
- Average wages: Restaurant employees who earn tipped minimum wage may be better suited for weekly paychecks. Forcing employees who receive low wages to wait two to three weeks for payday could damage morale.
- Company cash flow: Paying weekly means you must have enough cash available to pay more often. Some businesses have cash flow cycles that require more time before bank accounts are replenished—like stores that sell merchandise on credit.
- Profitability: Processing payroll more often usually costs more money ($50 to $100 per pay run for 10 employees), and some businesses, especially startups, have to manage their expenses more carefully. Using providers like Gusto allows employers to run unlimited monthly payrolls at no extra cost.
Here are a few pay period examples and some of the most common pay schedules from which you can choose. Keep in mind that certain industries have norms, and you may need to follow your industry’s tradition to remain a competitive employer.
We recommend using a pay period calendar and/or chart to help you.
- A pay period calendar makes it easy to see each pay date because they’re highlighted. Post the calendar on your desk or wall for easy reference and write additional information or reminders to help you keep track of other important dates. Just follow along each day, and you’ll always know when payday is approaching. This really comes in handy if you process payroll manually.
- Use a pay period chart when calculating your employees’ work hours. The chart lists the beginning and end dates you need to consider for each payroll, so you can easily ensure you’re only paying for time worked in the appropriate period. It’s a good idea to require your hourly employees to submit timesheets based on your set pay schedule.
With a monthly pay schedule, payroll is processed once a month. It’s not as common as the others and results in only 12 pay dates in the year. Some companies pay employees on the last Friday of each month, while others opt to pay on the last day of the month. If that happens to be on the weekend, they may pay on the last weekday before it. Monthly is used the least frequently of the pay schedules but is sometimes used by businesses that offer professional or business services.
2023 Monthly Calendar
2023 Monthly Pay Period Chart
Semimonthly, which is sometimes confused with biweekly, means twice a month. Many