Determining pay frequency can be challenging for business owners. While most employees prefer to be paid more often, a higher pay frequency can cost employers. Not to mention, there are federal and state laws that set standards for how employees are paid. That’s why exploring the different pay period options and federal and state payday laws is critical to help you choose the right pay frequency for your business and employees.
Pay Periods
A pay period is a recurring length of time that determines how often employees are paid. Depending on your state, there are several to choose from, and each has its pros and cons (but we’ll get to that later). The typical options for paying employees are:
- Weekly: This is usually on the same day of the week, like Friday, for the previous week’s work. Employees are paid 52 paychecks a year.
- Biweekly: Employees are paid every other week, either for the previous two weeks or the two weeks before that. This pay period results in 26 paychecks a year.
- Semimonthly: Workers are paid twice a month, usually on the first and 15th each month, receiving 24 paychecks a year.
- Monthly: This is typically either on the last day of the month or the first day of the following month. Employees receive 12 paychecks a year.
Federal Pay Frequency Laws
Federal law does not set requirements for how often you have to pay employees—that’s left up to the states. However, federal laws do say that employers must keep a reliable and consistent pay frequency. This means that, for example, you can’t pay employees weekly one month and then biweekly the next.
Under certain circumstances, you may be allowed to change your pay frequency. In order to do, so the following must apply:
- You have a legitimate business reason.
- The change is permanent.
- You are not avoiding overtime or minimum wages.
- You don’t unreasonably delay payment.
State Pay Frequency Laws
Almost every state has pay frequency laws indicating how often you should pay employees. Many states require a monthly, semimonthly, biweekly, or weekly payroll as the minimum frequency for paying employees. Keep in mind, you can always pay employees more often than the state requires.
For example, Ohio requires a semimonthly payroll, but that is not the only pay frequency you can choose in that state. You can also pay employees biweekly or weekly, as long as you at least pay employees semimonthly. Or, in New Jersey, you can pay executive and supervisory employees at least once a month but must pay all other employees semimonthly at minimum. Find your state in the map below to see what the minimum pay frequency is for your business.
Choosing a Pay Frequency
After looking at your state’s pay frequency laws, you’ll have to determine how often to pay employees. While employees typically prefer to be paid more frequently, you’ll also have to consider factors that affect your business.
Payment methods
Depending on the way your employees are paid, certain payment methods are more of a hassle than they’re worth. For example, if you’re still using outdated methods like checks or cash to pay employees, then upping your pay frequency means spending more money on printing supplies and more time on bookkeeping. Even with direct deposit, higher pay frequency can mean more transaction fees if you’re not utilizing online payroll software.
Employee benefits
You’ll also want to factor in benefits. Employee benefits like health insurance typically run on a monthly basis, so paying employees monthly or semimonthly makes calculating voluntary paycheck deductions easier than if you were to pay on a biweekly or weekly schedule.
Overtime
While overtime isn’t a factor for salaried employees, it can be difficult to track for hourly workers if they’re paid on a semimonthly or monthly basis when the pay date falls in the middle of the week. For example, if employees are paid on a Wednesday, it can be difficult to calculate overtime for that week because that week’s pay is split into two different pay periods.
Business owners typically find it’s best to pay different employees at different times. Many choose to pay salaried employees on a semimonthly or monthly basis, and weekly or biweekly for hourly workers.
Payroll Services
For small business owners, managing payroll can be one of the most time-consuming and challenging tasks there is. Need assistance? Outsourcing payroll administration to a professional employer organization (PEO) like Group Management Services (GMS) can ensure your employees are paid on time, every time. From electronic payroll processing to software to taxes, GMS takes an active approach managing payroll, so you can spend the extra, time, money, and energy growing your business. In addition to payroll services, GMS offers a full suite of HR services that compliment payroll administration, including human resources, risk management, employee benefits, and more.
Contact GMS today to see how we can help manage payroll at your organization.