A Pay Period Primer for Employers

Pay periods are a crucial aspect of payroll management that can greatly impact both employees and employers.

For payroll specialists, understanding the different types of pay periods, their pros and cons, and how to implement them effectively can help ensure compliance with labor laws and regulations, improve cash flow management, and foster positive relationships with employees.

In this guide, we’ll explore the various pay periods employers use and provide insights into the benefits and challenges associated with each. Whether you're a seasoned payroll professional or just starting in the field, this essential information will help you make informed decisions when it comes to setting and managing pay periods.

What is a Pay Period? And How Do They Work? 

A pay period is a defined interval of time for which an employee is paid their salary or wages and is used by employers to calculate and track an employee's hours worked, earnings, and deductions.

There are different types of pay periods that employers may use, including:

• Weekly: Employees are paid once a week, usually every Friday.
• Bi-Weekly: Employees are paid every other week, on a specific day of the week. This is the most common pay period in the U.S.
• Semi-Monthly: Employees are paid twice a month, typically on the 15th and last day of the month.
• Monthly: Employees are paid once a month, on a specific day.

During the pay period, an employee's hours worked are tracked and their pay is calculated based on their hourly rate or salary, any overtime or bonus pay, and any deductions for taxes, insurance, or other benefits. The final amount is then paid to the employee in the form of a printed paycheck or direct deposit.

Example 2024 Payroll Schedule

Your organization’s payroll schedule will depend entirely on the pay periods you use, but this is an example of a pay schedule for an organization using bi-weekly pay periods.

The Pros and Cons of Different Pay Periods 

When deciding how often to pay employees, you may also want to think about the benefits and drawbacks of each pay period.

Monthly  Pay Period

A monthly pay period is a system in which an employee is paid once a month, typically on a specific day of the month, for the work they have performed during that month.

Monthly pay periods can boost administrative efficiency because payrolls only have to be run once a month, which means less time spent in processing.

However, a monthly pay period can be challenging for employees to manage their cash flow, with money running out at the end of the month. This is especially a concern if unexpected expenses occur late in the month and the employee has little savings.

Weekly  Pay Period

A weekly pay period pays employees once a week, which can help them cover immediate expenses with more frequent paychecks or direct deposits.

On the other hand, weekly pay periods can be more time-consuming and increase the administrative costs for the employer due to running payroll far more frequently.

Bi-Weekly  Pay Period

A bi-weekly pay period is a system where an employee is paid every two weeks, customarily on a specific day of the week.

Bi-weekly pay periods offer a balance between the frequent payments of weekly pay periods and the larger payments of a monthly pay period. Employees get the benefit of consistent, predictable income without waiting too long for their paychecks. Payroll administrators also don’t have to process payroll every week, so the administrative burden is reduced.

Organizations also often choose a bi-weekly pay period to align with their accounting cycles, allowing them to reconcile payroll and other expenses more easily. Perhaps this is why 36.5% of private businesses in the U.S. pay employees with a bi-weekly system.

FAQs About Pay Periods

What is the difference between weekly and bi-weekly pay periods? 

The difference between weekly and bi-weekly pay periods lies in the frequency of payment and the number of days included in each pay period.

A weekly pay period pays employees once a week, so they receive 52 paychecks in a year. With bi-weekly pay periods, employees are paid every other week, typically every 14 days, and receive 26 paychecks in a year.

Both weekly and bi-weekly pay periods have their advantages and disadvantages. For example, a weekly pay period provides employees with more frequent access to their pay, which can be helpful for managing their cash flow and covering expenses.

On the other hand, a bi-weekly pay period provides employees with a larger paycheck, as it covers a longer period of time.

How many bi-weekly pay periods are in 2024? 

There are 26 bi-weekly pay periods of 14 days each in any given year. Depending on your organization’s pay schedule, March or June will be a three-paycheck month in 2024.

Is it better to get paid monthly or bi-weekly? 

Ultimately, there is no “best” answer that applies to everyone. It really depends on an individual's personal financial situation and preferences. Here are some factors to consider:

• Budgeting: For employees who prefer to budget on a monthly basis, it may be easier to receive a monthly paycheck. On the other hand, if they prefer to budget on a bi-weekly basis, receiving a bi-weekly paycheck may be more advantageous.
• Cash flow: With a bi-weekly pay period, employees receive a paycheck more frequently, which can help with cash flow and covering expenses. However, a monthly paycheck may provide a larger amount of money, which can be beneficial for paying bills or making larger purchases.
• Timing of expenses: The timing of expenses, such as rent or mortgage payments, utilities, and other bills, will likely impact whether employees prefer a monthly or bi-weekly pay period.

Can you have different pay periods for different employees? 

Yes, it is possible for a company to have different pay periods for different employees. Some companies might offer different pay periods based on the needs of their employees or the type of work they perform. For example, some companies might offer a bi-weekly pay period for salaried employees and a weekly pay period for hourly employees.

Having different pay periods for different employees can be beneficial because it allows the company to better meet the needs of its workforce and accommodate their individual financial circumstances. However, it can also be more challenging for the employer to manage payroll and keep track of hours worked for employees on different pay periods.

Regardless of the pay period, it’s important for a company to ensure that they comply with all applicable laws and regulations regarding payment of wages and employee compensation. Employers should also communicate clearly with their employees about their pay period and the amount they will be paid to help avoid confusion or misunderstandings.

What happens if an employee starts work in the middle of a pay period? 

If an employee starts work in the middle of a pay period, the employer will typically prorate their pay for that pay period to compensate them only for the days they worked. The prorated pay would be calculated based on the employee's hourly rate or salary, and the number of hours worked during the pay period.

For example, if an employee starts work on the 15th of a 30-day pay period, they would be paid for the remaining 15 days of that pay period. If the employee is paid hourly, their pay would be calculated based on their hourly rate and the number of hours they worked during that 15-day period.

If the employee is paid a salary, their pay would be calculated by dividing their salary by the number of days in the pay period and multiplying that amount by the number of days they worked.

It's important for the employer to clearly communicate the pay period and prorated pay arrangement to the new employee, so they understand how they’ll be paid and the amount they can expect to receive. Employers should also keep accurate records of the employee's start date, pay period, and hours worked to ensure compliance with applicable labor laws and regulations.

Let Employees Choose Their Own Pay Period With On Demand Pay

No matter how often your organization pays employees, payday is always highly anticipated. Research shows 63% of Americans live paycheck to paycheck, and one in five don’t set aside monthly savings.

To meet the needs of the modern workforce, you need modern solutions. On-demand pay offers the opportunity for employees and employers to be flexible with wages, so you can offer your employees an alternative to pay advances and high-interest payday loans.

Paylocity’s On Demand Payment provides early access to a portion of earned wages during the active pay cycle (before the scheduled payday), without additional paperwork, special permission from HR or managers, or changes to your payroll processes and cash flow.

On Demand Payment is a competitive employee benefit that assists with retention and recruiting efforts, and it’s easy to offer. Request a demo to see how!