Choosing the proper payroll schedule for your company can significantly benefit your employees. As some employees live in different parts of the world, their paying habits differ. Some like to get a weekly paycheck, some bi-monthly, and others monthly.
Many countries have this regulated, and it is wise to be compliant. In this regard, flexible payslip generation software can do wonders for your head of payroll and make the whole process easier and hassle-free. So let’s explore a payroll schedule, how often payday can occur, and what is the best plan for your company.
What is Pay Schedule?
Pay schedule is, simply put, how often your employees get their cheques. A pay schedule usually consists of a pay period, a time your employee has worked for you, and a payment date. The payment period determines how much compensation will your employee receive for their work.
The date when your employees finish is usually not the day they get compensated. For example, if an employee has worked for a week, Mon to Friday, they will usually get their compensation the following Monday. That’s called a pay date. There needs to be some time to process and verify their work. A payroll schedule determines how often that pay date happens in a given month, year, etc.
Types of Payroll Schedules
There are four basic types of payroll schedules, and they all have pros and cons. So let’s examine them and how they can be beneficial or detrimental to your business.
Monthly Schedule
The first one is getting your cheque every month. Getting a cheque every month means you get twelve pay periods in one fiscal year, which is usually the most convenient way of getting paid by your employer. The main benefit of a monthly payroll schedule is that it only requires your company to have twelve pay periods in a year and has the least amount of expenses. It also has the least amount of paycheck process. However, when it comes to your hourly workers, it is not as good. Most of your hourly workers can’t wait for an entire month to get paid. Hourly workers prefer to get paid on a more frequent basis.
Bi-Monthly Schedule
A bi-monthly schedule means your employees get their cheques twice a month. Employees get their payment on the first, last of the month, and in the middle. Getting their pay this way is consistent and can increase employee satisfaction because it does wonders for their budgeting. A bi-monthly schedule works well with your full-time employees because they can plan their budgets more effectively. In addition, if they know that another paycheck is coming soon, it will alleviate some tension and strain their budget.
This does not work well for your hourly employees as they have to wait for a fixed date for their pay, putting a strain on their budget. Another bad part is when those selected pay dates fall on weekends or holidays. When this happens, you must do extra calculations or pay your employees early. Even then, you can have delays.
Bi-Weekly Schedule
A bi-Weekly is by far the most common payroll schedule for any company, especially one that works primarily with hourly workers. It is excellent for paying and working out overtime for your hourly workers. Sometimes they even work more so they will fill in the extra days and get a higher paycheck.
A bi-weekly pay schedule is all, however, pure hell for your accountants. This means that there are three pay periods and managing deductions is a pain. In addition, as your benefits tend to be calculated only on a monthly base, your deductions tend not to match up perfectly.
Weekly Schedule
A weekly schedule means pay usually falls on Fridays or whenever the last day of the working week is. A weekly schedule is the most preferred payroll schedule for most employees, especially hourly workers, and freelancers. However, this is the most costly and most mistake-prone way of payment and carries the highest processing cost of all four types of payroll schedules.
Best Payroll Schedule for Your Organisation
If you are wondering what payroll schedule works best for your organization, you have to ask yourself what types of employees you have. For example, if your company has primarily full-time employees, the best way to pay them is either monthly or bi-monthly. On the other hand, if you mostly hire hourly workers who have a lot of overtime, then bi-weekly or weekly might work best.
Millennials are becoming the dominant workforce, and their loyalties usually lie with who treats them best. Therefore, having a good payroll schedule is essential for any healthy business as it may be a deciding factor for many new hires and retaining old ones.
For a related topic check the best time-tracking practices in 2023!