For every small business owner, it is difficult to answer the question, “How many pay periods in a year?”
When it comes to employees, deciding a pay period is one of the primary concerns for any business.
Here is a comprehensive guide for employers to understand the concept of pay periods and other frequently asked questions by both employees regarding them.
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What Is a Pay Period?
A pay period is a frequency at which a company needs to make payroll. On the flip side, that also means a pay period determines the number of times employees receive their paycheck.
The pay period is important for a number of reasons. For instance, it is the basis of tax liability and allocations for employee benefits.
Types Of Pay Periods
Common pay frequencies used by a majority of employers are:
Weekly Pay Period
In the weekly pay period, employers release the payment for their employees at the end of every week. This means the employee receives 52 paychecks every year.
Pros of a Weekly Pay Period
- This pay period works best for employees hired to work on an hourly basis
- Weekly payments increase the morale and productivity of the employee and motivate them to perform better
- Employees who are paid weekly are probably living paycheck to paycheck. Having that weekly paycheck eases their financial burdens and ensures a regular cash flow.
Cons of a Weekly Pay Period
- Processing payment every week is a time-consuming process
- There can be no scope of delay in payments as the employees expect their wages on the same day every week
Bi-Weekly Pay Period
Payment is processed on a specified day every two weeks in a bi-weekly pay period. This works out 26 bi-weekly pay periods in a year.
Pros of Bi-Weekly Pay Period
- Ideal for hourly workers
- The bi-weekly pay period is less time-consuming than processing weekly payments.
- The employee will receive frequent paychecks in a month, which will motivate them and increase their productivity at the workplace.
Cons of Bi-Weekly Pay Period
- In some years, there can be 27 pay periods which means that you have to pay additional wages to the employees. However, that occurs only once every 11 years
- There are situations where the first and last pay period is in two different months which can make payroll deductions complex
Semi-Monthly Pay Period
A semi-monthly pay period is processed for payroll on the 15th/16th and 30th or last day of the month. The employer needs to make payroll 24 times per year.
Pros of Semi-Monthly Pay Period
- Employees can plan their finances accurately as payments are made twice a month on a fixed date
- Best suited for salaried employees
- It is simple to manage and there will be no complication on leap years
- The payroll processing cost is lesser as compared to other pay periods
- Accruals and contracted benefits are easy to calculate in semi-monthly pay periods
Cons of Semi-Monthly Pay Period
- On holidays, the payment date becomes a task. In that case, it needs to be processed in advance to ensure payroll is made on time.
Monthly Pay Period
A monthly pay period, also called the monthly salary, is processed on the 30th or the last day of every month. With a monthly pay period, an employee gets 12 paychecks per year.
Pros of Monthly Pay Period
- Payroll only once a month
- There will be a fixed date every month for the employees to expect their payment
- Most suitable option for salaried employees
- It saves time and makes calculations, deductions, and payments of taxes easier
Cons of Monthly Pay Period
- Not suited for employees working on an hourly basis
- Like semi-monthly pay, the payday needs to be adjusted earlier if it falls on a holiday to avoid inconvenience for the employees
Frequently Asked Questions on How Many Pay Periods In A Year
What is the difference between a pay period and a pay date?
The pay period is the duration of time your team works and the pay date is the particular day on which the team receives their paychecks.
How To Calculate Pay Periods?
This decision on pay periods is based on many factors, such as:
- What is the payment cycle to the company from end-users?
- How often do employees need their paycheck?
- Are your employees hourly or salaried?
- What type of pay period does the state where you function approve?
For instance, for an employer who has hourly employees, the weekly pay period is best. This is because most companies give weekly paychecks to hourly employees and they’ve come to expect that cycle too.
However, if a company has more salaried employees and bills its clients at the end of the month, then a bi-monthly or monthly pay period will be suitable.
Can the employers change pay periods during the year?
A company or employer can change pay periods during the year. It may be complex and cumbersome, but not impossible.
Before proceeding with changing pay periods, the employer has to review and comply with the regulations set by the Fair Labor Standards Acts (FLSA).
Is it possible to use different pay period schedules for each employee?
Yes, it is possible. If it is convenient for the employer, then they can have different pay periods for each employee. For instance, if you have different departments in your company then you can set up semi-monthly for upper management and weekly for salaried employees.
Setting up different pay period schedules for employees is beneficial for larger companies. For companies with less than 100 employees, it is beneficial to stick to a single pay period for all employees to reduce payroll complexities.
What is the difference between a pay stub and a pay period?
A pay stub is a document where an employee’s pay is broken down into its components. Paystub is a slightly dated term and now it is usually referred to as a payslip. A paystub mentions the following:
- Employer information
- Employee information
- Pay period
- Employee pay break-up
- Gross pay
- Net take-home salary
Read our blog to learn more about paystubs along with templates.
How Many Pay Periods in a Year is Right for Your Company?
How many pay periods in a year?
This seems like a fairly straightforward question but the right one for your company is the one you can make payroll on comfortably.
Every pay period has its own pros and cons and choosing one of them is essentially based on your business needs and team size. The pay period you choose isn’t that important.
The only thing that matters is that every payroll is accurate and on time.
But in case you do have issues with payroll and want to solve them retroactively, here is a guide on retro pay for employers.