When you have employees, you need to run payroll so they can receive their wages. Before paying employees, you need to decide on a pay frequency. Your industry, the number of employees you have working for you, the type of workers you have, and legal requirements determine your pay frequency. But first, what does pay frequency mean?
What does pay frequency mean?
Pay frequency is the amount of time between an employee’s paydays. It determines how often you pay employees. There are four pay frequency options: weekly, biweekly, semi-monthly, and monthly.
What does salary frequency mean to employees? The pay frequency you choose will determine the number of paychecks an employee receives.
Now that you know the payment frequency definition, it’s important to know that it will not impact an employee’s tax liability or net pay. Over time, the employee takes home the same amount of pay.
Your industry might dictate which pay frequency you use. Certain jobs pay weekly while others tend to pay monthly. For example, according to the Bureau of Labor Statistics, 70.6% of construction workers are paid weekly while only 12.6% of education and health services employees are paid weekly.
The number of employees you employ might also impact your pay frequencies. For example, 72.9% of companies with 1,000 and more employees use a biweekly pay frequency while only 31.5% of businesses with 1-9 employees pay biweekly, according to the BLS.
The type of workers you employ can also play a part in your business’s pay frequency. You might be wondering, is salary paid weekly or monthly? The answer isn’t so cut and dry—it depends. In some cases, hourly workers are the ones who are paid weekly because they do not follow a set schedule like salary employees. You can establish different pay frequencies for salary vs. hourly employees, although this might get confusing if you run payroll by hand.
Types of pay frequency options
Now that we’ve answered “What is pay frequency?”, you might want to learn more about each of the four options— weekly, biweekly, semi-monthly, and monthly— to help you pick the right one for your small business.
Under a weekly pay frequency, employees receive their wages each week. Their paychecks are less money and more frequent. You will need to run payroll more often than with any of the other frequencies.
Weekly pay frequencies are the second most common option with 32.4% of employees falling under this category. Different industries and company sizes differ from this statistic, however. Businesses with fewer employees might choose to use weekly pay frequencies more than companies with many employees.
An employee paid weekly receives 52 paychecks per year.
With a biweekly pay frequency, you pay employees every other week. Employees will receive their wages the same day each pay period, like on a Friday of each week. Employees receive two paychecks each month, although some months differ. There are two months in the year where employees receive three paychecks instead of two.
According to the BLS, 36.5% of employees are paid biweekly, making it the most popular pay frequency. Again, keep in mind that different industries and company sizes can impact this statistic.
A biweekly pay frequency is a happy medium between weekly and monthly pay frequencies. If you pay employees biweekly, they will receive 26 paychecks over the course of one year.
It can be easy to confuse semi-monthly pay frequencies with biweekly schedules because employees receive wages twice per month with both (for the most part). But with a semi-monthly pay frequency, you pay employees on specific dates, but the days might differ. For example, you can pay an employee on the 15th and 30th of each month. These dates can fall on any of the seven days of the week.
A semi-monthly pay frequency can be difficult for employers and employees to keep track of. Employees can receive their wages on a Sunday or a Friday, all depending on the day the date falls.
Semi-monthly pay frequencies are the third most popular payment option. The BLS reports that 19.8% of employees are paid semi-monthly.
With a semi-monthly pay frequency, you will give employees 24 paychecks each year, compared to 26 with biweekly pay frequencies.
If you pay employees monthly, they will receive one paycheck per month. Their paychecks are more money but less frequent. Monthly paychecks can make financial planning difficult for some employees.
Only 11.3% of employees are paid monthly, making it the least common pay frequency. Under a monthly pay frequency schedule, you give employees 12 paychecks per year.
Pay frequency laws
Before you create a pay frequency schedule, you need to understand the laws that surround paying employees.
Federal pay frequency law
Although no federal law says what pay frequency you must choose, you are required to keep the same pay frequency throughout the year for each employee. You cannot change up an employee’s pay frequency when you feel like it.
Pay frequency requirements by state
There might not be a federal law regarding pay frequency, but there are state requirements. Each state regulates employee pay differently, so it’s no surprise that there are rules on pay frequencies.
For example, employers in Maine must pay employees at regular intervals that do not exceed 16 days while Nebraska employers get to choose pay frequencies.
The Department of Labor offers an easy-to-use table that outlines pay frequency requirements by state. Before deciding on frequency, check with your state laws.
Things to keep in mind when choosing a pay frequency
Before selecting a pay frequency, remember to take the following into account:
- Number of employees
- Hourly vs. salary workers
- State laws
These four factors aren’t the only things you should consider, however. You also need to keep in mind things like how long payroll will take you and hidden fees associated with some frequencies. For example, you might pay more money when you run payroll more frequently.
If you have a weekly pay frequency, you will be running more payrolls than with any of the other pay frequencies, which takes up more time and energy. With payroll software, you can significantly cut back the time it takes you to run payroll. And, you get to choose the frequency that works for your business.
Keep in mind that some payroll software companies charge you based on the number of payrolls you run each month. You could end up paying more to run weekly payrolls than running biweekly, semi-monthly, or monthly payrolls. However, some software options, like Patriot Software, charge you the same amount regardless of which payroll frequency you choose.
Need a way to keep your payroll under control? With Patriot’s online payroll services, you pay per employee, not per paycheck. Get your free trial today!
This article has been updated from its original publish date of 10/30/2014.
This is not intended as legal advice; for more information, please click here.