When setting up payroll for your business, one of the first major decisions you’ll make is how often to pay your employees. But it’s not as simple as picking a schedule that sounds convenient.
- Too frequent? You’ll spend more time on payroll processing, and cash flow might take a hit.
- Not frequent enough? Employees may struggle to budget, leading to higher turnover.
- Industry norms? Some businesses are expected to pay weekly, while others function better on a monthly schedule.
- Legal requirements? Certain states have minimum payroll frequency laws you must follow.
At Whirks, we advise business owners and provide payroll services but we also personally experience the pros and cons of different back-office processes.
Our team is a mix of salaried and hourly employees, and several members work remotely in different states. We know how confusing it can be as a business owner and how tough it is to remember administrative tasks during a busy year.
This article will define the four different payroll periods, their pros and cons, and which one fits your industry best.
What You Should Consider Before Choosing a Payroll Frequency
Before exploring the four different payroll frequencies, you need to consider a few factors to consider while you're reading the article.
What Are the Legal Requirements?
You do not have total discretion in determining your pay schedule as an employer. Several states have requirements for the minimum pay frequency.
The Department of Labor has a helpful chart for state payday requirements, but you can also consult with your state labor office, your payroll partner, or your HR consultant for help on payday requirements.
For example, if you’re in the state of Tennessee (where our primary office is located) employers are required by law to pay employees at least once a month, but they have the right to pay their employees more often that if desired. Here’s a helpful breakdown of payday and wage requirements in the State of Tennessee.
Can You Change Your Payroll Frequency?
If you have a legitimate business reason and prepare your employees adequately, then yes, it is possible to change your payroll frequency.
The Fair Labor and Standards Act (FLSA) prohibits you from changing your payroll frequency for any unethical business reasons, like delaying payment to your employees. Changing your timetable can also mess up your tax withholdings. However, if you’re considering changing your pay periods to pay employees faster, or to streamline payroll management, most states allow changes as long as employees are given proper notice.
Can You Pay Salaried and Hourly Employees on Different Schedules?
Yes, but it depends on your administrative capacity.
Salaried employees (exempt from overtime) generally have fewer preferences regarding pay frequency, whereas hourly employees (non-exempt) may have stronger preferences based on budgeting needs. If your back-office team can handle separate payroll schedules, you can pay each group differently.
Now that we’ve gone over pay date requirements, let’s talk about the four general pay periods and which ones are most suited for your industry.
1. Weekly Pay
Weekly payroll means employees are paid every week, resulting in 52 pay periods per year.
This schedule is most common in industries with hourly workers, where employees expect frequent paychecks, and businesses need a simple way to track overtime on a weekly basis.
One of the biggest advantages of weekly payroll is easier overtime calculations. Since each pay period aligns perfectly with a standard 40-hour workweek, there’s no need to split overtime calculations across two different payroll periods.
It's usually the preferred method among your employees to get paid too which could help you retain employees longer and keep them more satisfied on the job.
Best for blue-collar industries
Since processing overtime is easier on a weekly basis this is an ideal fit for blue-collar services and hospitality industries. It's also important to know that many government contracts require weekly pay for construction workers and other industries.
However, running payroll every week adds to administrative workload. Processing payroll this frequently means more tax filings, direct deposit transactions, and potential for errors. It’s also more expensive, as payroll providers often charge per payroll run. Businesses with inconsistent revenue may find it difficult to cover weekly payroll costs consistently.
2. Bi-weekly Pay
Bi-weekly payroll is one of the most common pay schedules in the United States, with employees receiving 26 paychecks per year. Employees are paid every other week on the same day (such as Friday or Wednesday), and this schedule only shifts if a holiday interrupts payday. In those cases, many employers choose to process payroll a day earlier, which can be an added benefit for employees.
Many businesses choose bi-weekly payroll because it balances frequent pay for employees with manageable payroll processing for employers. Since paydays are always on the same day of the week, many employees find it easier to budget compared to semi-monthly payroll, where pay dates shift.
Best for healthcare industries
This is the most common option for healthcare services, with the Bureau of Labor reporting that 52.9 percent of healthcare professionals are paid bi-weekly.
Hospitals, nursing homes, and home healthcare services often follow a bi-weekly schedule to align with payroll cycles and shift work. However, overtime is always calculated based on a workweek—not a pay period. If an employee works more than 40 hours in a single workweek, those additional hours are counted as overtime, regardless of how many hours they worked over the two-week pay cycle.
For instance, if an employee worked 90 hours in a bi-weekly pay period, their overtime depends on how those hours are distributed. If they worked 45 hours in both weeks, they would have 10 hours of overtime. However, if they worked 30 hours one week and 60 the next, they would have 20 hours of overtime since each workweek stands alone for overtime calculations under the Fair Labor Standards Act (FLSA).
3. Semi-Monthly Pay
Semi-monthly payroll means employees receive two paychecks per month, typically on the 1st and 15th or the 15th and 30th, totaling 24 pay periods per year.
This payroll schedule works well for salaried employees and businesses that want to simplify benefits deductions and tax withholdings since paydays are evenly spaced throughout the year. However, for hourly or non-exempt employees, semi-monthly payroll can complicate overtime calculations since pay periods don’t always align with a standard 40-hour workweek. This means employers must separately track weekly hours and ensure overtime is paid correctly.
Since pay dates shift depending on weekends and holidays, businesses often need to adjust payroll processing dates, which can create confusion for employees tracking their income.
Best for white-collar industries
Many corporate, finance, and professional service firms use semi-monthly payroll. A semi-monthly pay period is ideal for information services, with the Bureau of Labor citing that 35.9% of the industry is paid this way. This may be a good fit for your business if you employ several data analysts, content managers, or librarians.
4. Monthly Pay
Only 11.3 percent of businesses in the US pay their employees monthly, making it the least popular method. With monthly payroll, employees receive one paycheck per month, resulting in 12 pay periods per year.
Since payroll is only run once per month, businesses save time on tax filings, direct deposits, and payroll provider fees. It’s also easier for financial planning, as payroll aligns with month-end closing.
While it saves a business the most time and money, it is the least desirable option for employees, especially if they are living paycheck to paycheck. Some states prohibit monthly payroll for hourly workers, requiring more frequent pay schedules.
Best for financial services
Because of these challenges, monthly payroll is typically used for executives, finance professionals, and commission-based employees who don’t rely on a steady paycheck.
The Bureau of Labor attributes 17.6% of financial services pay their staff monthly. If you're an investor or stockbroker, your business may pay you this way. Paying your employees once a month is easy because the date is always the same each month and it’s easier to budget for payroll expenses. Another reason some employers opt for monthly payroll is for their financial reports.
Consider Your Employees and Your Back Office
Choosing the right payroll frequency for your industry ensures that your team gets paid correctly and on time, which is essential for retaining employees. You should also consider which industry you’re in, and how that should influence your pay schedule. If you’re in a high-turnover industry with semi-monthly payroll, your competitors may be offering weekly payroll which could provide them a hiring edge.
However, you also have to consider the potential back-office burden. Do you (or your manager) have the time to calculate overtime pay every other week? Are you designating a day to process payroll and manage administrative tasks?
Remember when choosing your pay frequency take into account your state pay and wage requirements, what frequency might be best in your industry, and the most beneficial for you as you process payroll for your employees.
Evaluating payroll frequency often leads to a bigger realization: Is my payroll provider still the right fit? If payroll errors, slow processing, or limited flexibility have been ongoing frustrations, it might be time to make a switch.
If you're wondering whether now is the
right time to make a change, check out When Is the Best Time to Switch Payroll Providers?
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