Much like a drummer in a band, payroll sets the rhythm for a business’s entire operation. However, the tempo of your company’s pay schedule is dependent on its leaders, who are responsible for conducting the pace at which employees are paid. 

Having a simple, predictable, recurring schedule that determines how often and when employees are paid ensures workers are compensated for their efforts on a regular basis. It also simplifies monthly reporting requirements for expense accruals, tax deposits, and insurance.

Continue reading to gain a stronger understanding of the different types of pay periods and how to determine the option that’s best for your company. 

What Is a Pay Period?

A pay period is a recurring schedule that determines how often employees are paid. Having a simple, predictable process ensures workers receive pay for their labor on a regular basis. It also simplifies monthly reporting requirements for expense accruals, tax deposits, and insurances.

Payroll impacts businesses and their employees alike. It shapes every financial aspect of the company, from cash flow prediction to expense reporting. That’s why it’s important to understand pay periods and how to choose the right one for you.

Pay Period Types

From weekly to biweekly, semi-monthly, monthly, quarterly, and annually, each unique pay cycle has its advantages and considerations, depending on numerous factors, including industry, cash flow management, administrative efficiency, employee preferences, etc.

Among the aforementioned options, these are the four most common types of pay periods:

• Weekly Pay Period
• Biweekly Pay Period
• Semimonthly Pay Period
• Monthly Pay Period

Weekly Pay Periods

A weekly pay period consists of seven days. For a full-time employee, each pay period generally consists of a 40-hour workweek. State overtime rules vary based on your place of business.

According to a 2022 ADP study, a weekly pay cycle is more prevalent among hourly workers (42%) compared to salaried workers (12%). From a payroll perspective, this is the most expensive option to process because there are 52 payroll cycles each year. Those payroll processing fees add up!

Advantages

• Employees are paid frequently (52-53 pay periods).
• Budgeting and cash flow are simplified.
• Payday generally occurs on a Friday, four to five days after the period has been closed out.

Disadvantages

• Payroll processing fees are higher due to more frequent payroll cycles.
• Employer accrual expense reporting happens more often.
• Pay periods can often extend into the next month.

Biweekly Pay Periods

A biweekly schedule consists of 26 pay periods in a year. Each pay cycle generally consists of 80 hours for a full-time employee.

Like the weekly pay period, a biweekly pay cycle will always begin and end on a specific day of the week, usually Friday. The employer will generally deliver payroll checks to employees on the following Friday. 

A 2022 ADP study found that the biweekly approach is the most common pay cycle in the U.S., accounting for 83% of workers. 

Advantages

• Employees get paid often (26-27 pay periods).
• The payroll department has more time to review timecards.
• Payday generally occurs on a Friday, four to five days after the period closes.

Disadvantages

• Payroll processing fees are still higher than less frequent payroll options.
• New employees may need to adjust to longer pay periods.
• Complicates bookkeeping when compared to weekly.

Semimonthly Pay Periods

A semimonthly schedule has 24 pay periods in a year. Each month will always have two work periods. Generally, a company may have a pay period that runs from the first to the 15th, and a second cycle that runs from the 16th to the last day of the month.

Since this pay cycle doesn’t always end on the same day of the week, it can create challenges. Employees may get paid on the next possible business day after the work period ends.

Advantages

• Employees get paid often (24 pay cycles).
• Hours worked will always remain in the month for that work period.
• Simplifies employer accrual expense reporting requirements by reducing frequency.

Disadvantages

• May not be allowed under your jurisdiction.
• Can confuse employees.
• The pay period often ends on a different day of the week.

Monthly Pay Periods

A monthly pay period consists of 12 pay cycles per year. Each month will represent the total hours for that month. This is the least costly option from a payroll perspective. However, it can be challenging for employees to budget accordingly when paid only once a month. Many consultants or freelance professionals use this method.

Advantages

• Great for freelance business owners or contract employees.
• Simplifies accounting.
• Decreases processing time.

Disadvantages

• Payroll processing fees are low due to less infrequent payroll cycles.
• Cash flow prediction can be more challenging.
• Some vendors or contractors may take issue with this payment schedule.

What Type of Pay Period Is Right for You?

Selecting the best pay period for your type of business is not easy. The proper choice depends on whether your employees are hourly or salaried, the kind of business you operate, and who handles your payroll. It also depends on the laws enacted within your state. 

While we can offer some general advice, you should consult with your accountant or CPA and inquire what they think is best for your unique business needs.

Monthly: Only 4.7% of employees are paid monthly, making it the least popular option in America but among the easiest when it comes to managing benefits packages.

Semimonthly: This pay period often works best for workplaces with salaried employees, as it can be complicated to calculate overtime benefits for hourly workers.

Biweekly: This pay cycle is the most popular, and one of the easiest to use for hourly employees. According to the U.S. Bureau of Labor Statistics, 43% of private establishments paid employees every two weeks as of February 2023. 

Weekly: This pay cycle is typically best for hourly employees with irregular schedules, particularly if they work a lot of overtime.

Take the Stress Out of Payroll

Depending on the pay period you choose, you might face different challenges. OnTheClock simplifies this process by providing a user-friendly platform to set and manage a pay period. With just a few clicks, you can select your preferred pay period type, enter the appropriate details, and save your settings. Whether you need to set up weekly, biweekly, semimonthly, or monthly pay periods, OnTheClock streamlines the process, ensuring smooth payroll operations and content employees.

How to Set Your Pay Period in OnTheClock

How you set your pay period in OnTheClock will depend on which pay period you select. Here’s the nitty-gritty.

Step 1: Log in as an administrator.

Step 2: Navigate to “Time Clock Settings.”

Step 3: Under “Basic Settings,” choose your pay period type.

Step 4: Configure your pay period according to the instructions below.

Step 5: When finished, click “Save Settings.” 

OnTheClock offers companies convenience and flexibility, allowing users to easily customize pay periods to align with their specific payroll needs. The platform’s intuitive interface allows for effortless time management, enabling users to set up automated reminders and notifications to ensure employees are paid on time, every time. With its comprehensive features, user-friendly interface, and seamless integration capabilities, OnTheClock is a formidable solution for all of your time clock needs. Give it a try for 30 days, for free, today, and see why 125,000 individuals are using OnTheClock to manage their employees’ time.