This article is part of a larger series on How to Do Payroll.
A pay period is the time over which employees work and are paid. Pay periods are fixed and most often occur on a biweekly or semimonthly basis (some state laws require a certain frequency). There are several pay periods from which to choose—and our payroll calendars make them easier to track.
Using Our Pay Period Calendars & Charts
Using a pay period calendar and/or chart can help you avoid missing a payday. Bookkeepers find them useful when they need to record and forecast payroll expenses, and employees might want a copy to reference if they get confused (especially if payroll is paid in arrears).
Track Employee Hours Using the Pay Period Chart
After printing your payroll chart, you can use it when calculating your employees’ work hours for the pay period. 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 time sheets based on your set pay schedule.
Pay Employees on Designated Pay Date
The pay period calendar makes it easy to see each pay date because they’re circled. You can post the calendar on your desk or wall for easy reference. You can also 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.
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 our state payroll directory for details.
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 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.
Employees are paid once a week; their paychecks include hours worked (or salary) for a workweek—for instance, Sunday through Saturday. Many companies choose Friday as their payday since it’s the last weekday, but it can be any day of the week. Many businesses in the construction, manufacturing, restaurant, and mining industries pay on this cycle.
Biweekly means payroll is run once every two weeks or every other week, wherein employees are paid for two workweeks. For most months, this equates to two paydays, but three months in the year (that vary from year to year) have three biweekly paydays.
One thing to note is that biweekly is the most common pay schedule overall, with more than a third of US private businesses historically paying their employees every two weeks. Many businesses in education, healthcare, leisure and hospitality, and information technology industries follow it.
Semimonthly, which is sometimes confused with biweekly, means twice a month. Many companies opt to pay on the 15th and last day of every month. If either of those days falls on a weekend, payroll is processed on the closest weekday before it. The pay period can include 14 to 16 days, depending on the number of days in the month. Typically, businesses in the financial, information technology, professional, and business service industries pay semimonthly—it’s the second least frequently used 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.
Download the pay period calendar and corresponding chart that fits your payroll schedule.
Paying in Arrears vs Current
When you pay on a current schedule, you pay employees as soon as or before their pay cycle ends. Paying in arrears means there’s a delay between the time employees work and when they receive pay for that work. This delay could be a week or more, depending on state laws.
Here’s an example of paying employees in arrears. Jeff sets his pay period as Sunday through Saturday but opts to pay Friday of the following week (six days after the last workday). While this is sometimes a nuisance to new employees who may have to work a week “in the hole,” meaning they’re not paid at the end of their first week, it can be beneficial for some employers.
If you pay your employees for time that has not yet passed, there could be unexpected changes in their schedule for which you’ll need to make adjustments on the next pay period. This can become cumbersome as you’ll have to keep track of pay cycles for which you’ve already processed payroll; you must comply with federal overtime laws—paying time and a half (1.5 times regular hourly pay) for hours worked over 40 in a workweek.
Determining Whether to Pay in Arrears or Current
There is no hard rule guiding whether you should pay in arrears or current. You should consider the needs of your business and your employees. Paying in arrears gives you time to gather all time sheets, tip reports, and other information to ensure you process payroll correctly; there’s no need to forecast employee schedules.
Paying current is less confusing for some employees and works well in certain instances. Let’s assume a company has a Sunday through Saturday pay cycle, with Friday being the payday. If the employees only work weekdays, Monday through Friday, there would be less guesswork. Although Saturday is a part of the pay cycle, the employees don’t work on Saturdays. It also works for salaried employees who are paid the same amount every pay period, regardless of hours worked.
Choosing the pay period that best suits your business is essential, and following it consistently is even more important. Our payroll calendars and charts make it easy to track the beginning and end dates of your pay cycle along with your pay dates, so you never miss payday or run payroll for the wrong period.
If you want an easy way to pay your employees regardless of your pay schedule, consider Gusto. You can choose from the four major payroll schedules and even set up multiple and custom schedules if needed. Sign up for a 30-day free trial today.