Which Payroll Schedule is Best for You?
Managing payroll can be a hugely demanding and time-consuming task. It needs the utmost focus and dedication, and cannot be ignored or put off because of its huge importance to your employees. This gives your payroll officer plenty to work on with only a limited time.
Payroll processing is an important function for any business, and choosing when and how frequently you will give your payroll is a task you need to think about properly. It doesn’t matter if you have a big business or not. What matters is how much you understand the operation and structure of your business to fully provide what it needs, like the right payroll schedule.
Payroll schedule goes by many names. It can be called pay schedule, pay period or payroll period.There are also different types of payroll schedules. The most common types of it are weekly, bi-weekly, semi-monthly and monthly. All of these have their pros and cons, and understanding them can greatly help you and how you choose your payroll schedule.
The weekly payroll schedule is when employees are paid the same day every week. This will result in 52 pay periods in a year. This kind of schedule is preferable for companies who have employees that are paid hourly such as companies with employees in the trade industry, freelancers and other contract employees, since their work hours can vary from week to week. It must be noted however that this schedule can be costly in terms of processing.
Employees tend to prefer more pay periods so they can manage their finances more efficiently. And for this, one of the best choices for a payroll schedule would be this one. Not to be confused with the semi-monthly payroll, bi-weekly payroll payouts happen every other week, resulting in 26 or even 27 pay periods in a year. This means that there can be months that there will be three pay periods. This would mean more work for the payroll officer, since all costs still need to be aligned when the payments were issued for tax purposes. This kind of schedule, however, will truly be beneficial to employees, especially if they are paid by the hour.
One very preferable payroll schedule is the semi-monthly payroll. With 24 pay periods in a year, it benefits both the employees and the employer. For the employees, the payroll will be given twice in a month, which are usually the first and the fifteenth of the month, giving them ample time to manage their finances properly. The cost of processing and the time spent on preparing payroll in this schedule also tend to be low, that is why payroll officers tend to like this payroll schedule. This schedule is also the most compatible with monthly bookkeeping/accounting schedules.
For this schedule, employees get their salary twelve times in a year. This, however, is not the most preferred by employees, since a one-month window between pay periods make it harder for employees to manage their finances. However, for the payroll officer and the employer, this will be the most efficient schedule out of the four mentioned and the processing cost is the lowest.
With these options, you can choose what you think is the best for you, your company and your employees. In running a business, it is important to remember to think of the best solutions without having your employees compromise too much in their end, especially in payroll process. Upon finding the perfect balance, you are sure to keep the business up in the game, with your employees happy to be there with you.