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Setting up a payroll calendar can be challenging. The amount of pay periods in one year varies based on how often employees get paid, and not all employees may be subject to the same pay periods. Choosing pay periods that make sense for your organization makes it more efficient and increases employee satisfaction. The frequency with which paychecks are issued also affects financial planning, cash flows, budgeting, and payroll complexity and costs.
According to the Bureau of Labor Statistics, the most common pay period in the United States as of 2023 is biweekly pay periods, with 43% of US employers paying their employees every two weeks on a specific date. Weekly pay periods are the second most common method, with 27% of US employers paying their employees weekly.
Monthly pay periods are the least common, with just 10% of US employers reporting that they pay their employees at this frequency. Semimonthly pay periods are also less common than weekly and biweekly pay despite also paying twice a month like biweekly frequency. Still, this arrangement is more common than monthly pay periods. Ultimately, biweekly pay periods are the most common type across different industries and firm sizes.
But which pay periods are the best for your organization? Just because biweekly pay is the most common doesn't mean it will be a good fit. Here is what you need to know about the different pay period frequencies and the factors that determine which best fits your needs.
Employees paid weekly have 52 pay periods in one year, one for each week. Weekly pay periods are best for employees paid by the hour, although salaried employees can also be paid weekly.
Weekly pay periods are common in the food services, construction, manufacturing, and retail sectors. While many associate weekly pay with service and retail jobs, the BLS reports that construction has the highest incidence of weekly pay periods, with 65.4% of the industry using this frequency compared to 35.4% of the service sector and 25.6% of the hospitality industry.
Weekly pay can be a bigger motivator for employees than a biweekly paycheck because they consistently get paid every week. This can make it easier for them to plan for bills and major expenses compared to more infrequent pay periods. For employees who don't have a consistent presence, such as temporary or part-time employees whose hours radically vary from week to week, weekly pay makes more sense.
However, weekly pay periods increase payroll processing costs and administrative burdens. These costs always increase and create more complexity when processing is more frequent.
Employees who receive biweekly paychecks have 26 pay periods in one year. Some months will have three paychecks instead of two, depending on how the annual calendar works out.
A vast majority of US employers use the biweekly pay period. While hourly, piecework and contingent employees can be paid biweekly, this arrangement is most common with employees who receive a salary. Timesheets are not required, and overtime is not clocked, the employee receives the same salary regardless of hours worked. This makes biweekly pay the most common choice for salaried workers.
While most employers use biweekly pay periods, the BLS claims that the education and health services fields use this pay frequency the most, with 63.6% of employers doing so. 54.9% of leisure and hospitality employers also use biweekly pay periods.
The difference between biweekly and semimonthly pay periods is that the semimonthly paycheck is specifically paid twice a month and can seem higher than biweekly paychecks due to the absence of the third check that appears some months.
Biweekly pay periods create more streamlined and predictable payroll processing and cost less than weekly pay. However, while biweekly pay is culturally accepted, payroll calendars may not always align with employees' lives and expenses. Employees may not know when they're getting paid, which can cause stress and low morale. The third paycheck in certain months must also be accounted for, unless the employer switches to semimonthly pay periods.
Since there are 12 months of the year, monthly paychecks have 12 pay periods in one year. This type of pay is less common in the US, seen most often with foreign companies with US offices or commission-based jobs like sales and finance. Per the BLS, the financial industry is the largest sector that uses monthly pay periods, with 18.4% of financial employers doing so.
Because payroll only needs to be processed once a month, processing costs and administrative burdens are incredibly low for employees with monthly pay periods.
However, this frequency tends to be reserved for highly paid sales and financial professionals who are far less likely to experience distress if a paycheck is later than expected. Most employees who plan their personal budgets around their paychecks cannot wait for one monthly check to take care of their bills and need more frequent biweekly or weekly paychecks to stay motivated and perform well.
When it comes to choosing the right pay period frequency for your employees, you need to consider the following factors:
Paying employees weekly may be worth the additional processing costs and budgeting constraints since regular pay keeps them motivated. However, it's important to have the proper payroll infrastructure to handle this administrative capacity. Depending on where the organization is established or an employee's location, there may also be mandates regarding pay frequency based on the hours worked or payscale. If you are mandated to pay at a certain frequency to operate in that jurisdiction, you must comply or change locations.
When determining which pay period frequency is best for your workforce, knowing the number of pay periods helps you budget and plan more efficiently while keeping employee morale up. Streamline your payroll with Exact Payroll's easy-to-use solutions. Explore our services to find the perfect fit for your payroll needs
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