Choosing the best payroll schedule plays a major role in every company. It doesn’t just help you figure out when you should pay the employees, but determining the schedule that best fits the company can affect its net income based on its payroll and payroll taxes. It also affects employees as these are the people who’ll always respond to any payroll errors and delays.
Tips for Choosing the Best Payroll Schedule
Before we head down to the commonly used payroll schedules, let’s take a look at the first few steps you need to look at in order to easily pick the right payroll choice.
- Remember that there are 52 weeks in each year. Make that fact your baseline to identify how many checks you should issue per year.
- Know how many employees the company has and how they should be compensated.
- Calculate overtime and ensure minimum wage compliance
- Check benefit payments
- Identify your accounting/bookkeeping system
If you have every bit in place, the next step is to figure out the payroll schedule that suits the business.
The Four Common Payroll Schedules
Weekly, bi-weekly, semi-monthly, and monthly are the four common payroll schedules you can choose from. Others can even make a combination depending on an employee’s status.
It’s good to take note that every time a payroll is processed, there is a cost incurred. The fewer payroll processed is equivalent to more savings. However, it’s not recommended that you jump to a monthly payment.
Check what happens on each type of schedule and the benefits it can provide the company.
On a weekly payroll, the employees are paid on the same time every week. This is the most preferred option when it comes to paying construction workers, plumbers, electricians, and other hourly workers with varied working hours.
- Employees can easily see their earned overtime
- Employees can manage their money better
- Expensive due to per cycle charges of payroll services
- More work for accountants who’ll calculate payroll taxes, overtime, etc.
With the bi-weekly option, employees are paid every other week, usually done every other Friday.
- Overtimes are easy to calculate
- Employees are paid 26 or 27 times a year
- The 26 paychecks don’t divide equally into 12 months
- May require two additional paychecks within a year
- Additional accounting/bookkeeping expenses
Semi-monthly payroll means paying employees twice a month, usually on the 15th and the 30th.
- Gives employees 24 pay periods per year
- Costs less than weekly and bi-weekly payroll processing.
- The most compatible with monthly bookkeeping/accounting schedules
- Easier benefit deductions calculation
- More difficult overtime calculation
- Adjusting pay dates when payday falls on a weekend or holiday
- Employees adjusting to flexible pay schedules
The least popular option, the monthly payroll schedule, simply means paying employees once a month. This process is used by some government agencies and universities.
- Employees are paid 12 times a year
- The least expensive in administrative costs
- Not a preferred option by employees
After choosing the best payroll schedule that is both compatible with the company and employees, the last step is to find a reliable payroll system that can make computing payroll way easier than doing that time-consuming manual payroll computations.
Salarium is not your ordinary software that sticks to tracking employee attendance and requests, but also makes computing payroll for thousands of employees quick and easy with just a few clicks.