A common question that many business owners find themselves trying to answer is, “What type of pay period should I use to pay my employees?” If you are a new business owner, there are some important questions you need to ask yourself to determine the best pay schedule for your business and your employees.

In this post, we’re going to outline the basics of setting pay period lengths, including the most common types, their pros and cons, the importance for non-exempt employees, and more.

What is a pay period?

A pay period is a recurring time schedule that will determine how frequently your employees are paid. Since it can be time consuming to make sure all of your employees’ pay stub data is in order, you want to pick a payroll schedule that works best for your business when it comes to operations and employee satisfaction.

It’s important that you have an established period of time for payments set up. A dedicated payroll cycle will ensure that your employees are paid on a regular basis for their time worked. It also simplifies monthly reporting requirements for several employer liabilities including expenses, payroll taxes, and insurance.

Additionally, not knowing when the next paycheck is coming could cause a lot of mental and financial stress for your employes. Knowing this, it’s not surprising that some business owners opt to use third-party payroll services or payroll software to help ensure that all payments are timely and accurate. Even small businesses can benefit from making this investment long-term.

The 4 most common pay period lengths

The four most common pay period lengths are weekly, bi-weekly, semi-monthly, and monthly. While each option has clear advantages and disadvantages, it can be difficult to determine which is best for your business. Let’s take a look at some of the pros and cons of each option.

Weekly pay periods

The weekly pay period type consists of 52 one-week pay periods. For a full-time employee, each pay period generally consists of a 40-hour work week.

A weekly pay period is the preferred pay period cycle for most hourly employees because they have income coming in every week.

However, from a payroll perspective, a weekly pay period is the most expensive to process because there are 52 payroll cycles in the year. Processing payroll so frequently is time consuming and can cause payroll fees to add up quickly.

Advantages

  • Employees get paid more frequently (which helps with retention).
  • Payday typically occurs on a Friday approximately 4 to 5 days after the pay period has been closed.
  • Management has time during normal business hours to review timecards and ensure that payroll is wrapped up by time payday comes around.

Disadvantages

  • Payroll processing fees are typically higher due to more frequent payroll cycles.
  • Employer monthly accrual expense reporting is more complicated because pay periods can frequently extend into the next month, resulting in additional calculations.

Bi-weekly pay period

A bi-weekly pay period — every two weeks or 14 days — consists of 26 pay periods in a year. Each payroll cycle typically consists of 80 hours for a full-time employee.

A bi-weekly pay period always begins and ends on a consistent day of the week. For example, the pay period starts on Monday and will end on Sunday 14 days later. An employer will typically deliver payroll checks to their employees on the following Friday.

Advantages

  • Employees get paid often — 26 times per year.
  • Management has time to review timecards and ensure payroll is wrapped up by payday.
  • Payroll and time costs aren’t quite as high as a weekly pay period.

Disadvantages

  • Employer monthly accrual expense reporting is more complicated because pay periods can frequently extend into the next month, resulting in additional calculations.

Semi-monthly pay period

A semi-monthly pay period has 24 pay periods in a year. Every month will always have exactly two pay periods. In most cases, a company will have a pay period that runs from the 1st to the 15th and a second pay period that runs from the 16th to the last day of the month.

Because this pay period cycle does not always end on the same day of the week, it can cause scheduling challenges for payroll. With a semi-monthly pay period, an employee will get paid on the next possible business day after their work period ends.

Advantages

  • Hours worked by employees will always remain in the month for that work period. This can help to simplify employer accrual expense reporting and reduce costs.

Disadvantages

  • An employer will have to decide when their employees will be paid. Because the semi-monthly pay period ends on a different day of the week, it can be challenging to schedule and produce paychecks in a timely manner.

Monthly pay period

A monthly pay period consists of 12 pay periods per calendar year. Each month will represent the total amount of hours worked for that particular month. The monthly pay period is the least costly from a payroll perspective. However, this pay period type can be especially challenging for employees to budget accordingly since they are only getting paid once a month.

Advantages

  • Hours worked by employees will always remain in the month for that particular work period. This may lead to simplified employer accrual exponse reporting and reduced costs.
  • Payroll processing fees are very low due to fewer payroll cycles.

Disadvantages

  • Employers will have to determine when their employees will be paid.
  • Because this pay period type always ends on a different day of the week, it can be challenging to schedule and product paychecks in a timely manner.

What is the most commonly used pay period type?

For customers that use Buddy Punch, we have found that bi-weekly payroll is the most common pay period, followed by weekly. Here’s a breakdown of the pay periods used:

  • 46% of our customers use a bi-weekly pay period.
  • 28% of our customers use a weekly pay period.
  • 21% of our customers use a semi-monthly pay period.
  • 5% of our customers use a monthly pay period.

What type of pay period should I use?

It is difficult to say exactly what the best pay period would be for your business. The pay period length you should choose depends greatly on whether your employees are hourly or salaried, the type of business you operate, and who’s running payroll. However, in addition to the pros and cons listed above, there are some other factors you should take into consideration when making the choice.

Employment laws

Federal and state laws also should be considered when determining pay periods, such as the Fair Labor Standards Act (FLSA). Although the Internal Revenue Service does not regulate the frequency of pay periods, some states do. Be sure to check with an employment attorney if you’re unsure of the laws and regulations that might impact how often you need to pay your employees.

Payroll fees

As we mentioned, payroll processing can be expensive, and the type of pay period you choose will impact your payroll fees. If you pay your employees more frequently, you’ll have more payroll processing fees; if you pay them less frequently, your payroll processing fees will be lower.

It’s important to determine approximately how much it would cost you to process payroll for each different pay period. You should also take into consideration the price for any software you may be using to process payroll.

Employee preferences

No matter what pay period length you select, you need to make sure that it is right for both your business and your employees. Have your employees fill out feedback forms to see which pay period type they’d prefer. While you won’t be able to please everyone, do your best to meet the majority halfway.

Payroll software makes running payroll easier

As you’re working through how you’ll process payroll for your business, we encourage you to seriously consider making use of payroll processing software like Buddy Punch to make the entire process easier with automation. In addition to eliminating some possible sources of human error, payroll software will help you save time and money on the process, regardless of how often you have to run payroll.

Learn more about Buddy Punch

Buddy Punch comes with unlimited payroll runs, integrated timesheets, automated payments so you never miss a pay period, and more. If your primary concern is ensuring that payroll is handled as easily and efficiently as possible, you really can’t go wrong with Buddy Punch.

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About the Author

Eric has more than 20 years of experience owning, operating, and managing businesses — everything from in-person, multi-location shops to fully remote SaaS companies. He uses what he's learned along the way to create helpful guides for other business leaders.