Key Points
1. Pay Periods are the frequent periods on which the employer pays wages to their employees.
2. Generally pay periods are divided into four types, weekly, biweekly, semi-monthly, and monthly.
Are you confused by the pay dates in leap years? Or Are you trying to schedule the best payroll for your small business? Then read this article to know about all the mechanisms of pay periods.
While entering 2021, it is very important to record that the fall of an extra Friday on the payroll calendar will lead to the 27 pay periods of the employers. Pay practices are a crucial component of what you as an employer have to offer, just like all other facets of the employee experience. The frequency of employee payments influences your capacity to recruit and keep top workers, so it’s more than just an administrative choice.
Then, how many pay periods does the perfect payroll schedule for small firms involve? Let’s dissect it and examine some data to compare your compensation methods.
Pay Periods: What Do They Mean?
Pay Periods are the continuous periods based on which the employers calculate the wages of the employee and pay them. The Fair Labor Standard Act (FLSA), enables businesses to pay their employees based on their regular payday but they do not give a specific idea about how often the paydays must be counted.
As a result of which many states have said there are strategies for payday frequencies. Pay periods are generally considered weekly, biweekly, semi-monthly and monthly. But there are no such states that allow paying their employees based on pay schedules bimonthly. Many states accept semi-monthly as their pay schedule but they have different requirements.
The frequency of employee payments is a crucial choice because it affects both employee recruitment and retention, as well as because you must be able to deliver paychecks consistently based on the schedule you choose.
If you miss your usual payday, even just a day or two, you risk FLSA complaints. A wage infraction can result in heavy fines, including double back pay and other penalties.
There are also some strategies to consider while setting your paydays. The shorter the payday the more employees value the business and it also helps to run every cost of your business effectively. You have to balance the cost of the businesses so that you can schedule the correct frequency for your paydays.
How Many Periods Does A Year Contain?
Working 52 weeks in a year contains pay period in the following ways:-
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Weekly: contains 52 pay periods per year
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Biweekly: contains 26 pay periods per year
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Semi-monthly: contains 24 pay periods per year
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Monthly: contains 12 pay periods per year
As a year contains 365 days which is not evenly divided into 7-day weeks so it is a little difficult to schedule a payday for weekly and biweekly. If you multiply 7 days by 52 weeks in a year you will have 364 days in a year. It means that every year, one day in a week occurs 53 times and not 52 times.
You might have 53 weekly pay periods rather than 52, or 27 biweekly pay periods rather than 26 if your payday falls on one of these “additional” days in the year. This complicates matters like payroll deductions for benefits in addition to wages.
You have two extra days to cope with during a leap year. You will get an additional pay period that year if you pay weekly or biweekly on one of those days.
Payroll Software is software that will help you to manage this and schedule a payday for you. If you choose the right software it will help you to get a wider range of payroll options and features. It will also help you to schedule the pay practices according to the employees’ preferences.
What Are The Types Of Pay Periods?
There are about 4 types of pay periods:-
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Weekly.
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Biweekly.
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Semi-monthly.
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Monthly.
According to the reports released by the U.S. Bureau Of Labor Statistics that the most common paid period among employers is biweekly. A survey shows that about 42% of employers pay biweekly, 34% of employers paying on schedule weekly, 19% of employers pay semi-monthly, and lastly, 5% of employers pay monthly.
There are some aspects you need to consider while selecting a payroll schedule.
Type 1: Weekly
According to BLS reports, there are about 36% of the businesses with below 10 employees have scheduled their payday every week. This type of pay period is the most common in the field of construction manufacturing, mining, and transportation industries
Weekly pay periods are crucial for lower-paid workers who do not have a safety net for unforeseen expenses. However, this frequency is the most expensive and time-consuming payroll plan.
Weekly pay periods might be cost-effective, depending on the composition of your workforce, your recruiting objectives, and your bookkeeping procedures.
Type 2: Biweekly
Biweekly pay periods are the second most pay schedule followed by about 32% of small businesses. With the increase in the size of the business the frequency of this type increases by about 73% for very large companies. This pay schedule is also been considered in different fields like education and health services.
Type 3: Semi-monthly
The schedule of this type of paper period is like it starts from the first day of the month till the 15th and again from the 16th till the end of the month. This type of period is a little challenging for the employer because your pay period should not coincide with each other.
About 23% of small businesses follow the page schedule semi-monthly. As the size of the company increases the popularity of this pay schedule decreases.
Type 4: Monthly
A rough estimation of about 10% of small businesses follows monthly pay periods. This type of being period is one of the easiest and cheapest ways for the employer to pay practice. But this type of being period is not so popular among the employees.
