What is a payroll schedule, and what are your options and obligations? Here's everything you need to know.
You’ve made good headway with your small business and are starting to hire more employees. Congrats, you’re making big moves! However, with additional staff comes the headache of additional payroll.
As a solo entrepreneur, you may not have given much thought to pay schedules in the past. However, chances are they will be important to your staff. Even if you’re still the only employee, establishing a payroll schedule for your small business is an essential step in managing your finances.
That said, what is a payroll schedule, and what are your options and obligations? Here’s everything you need to know.
The easiest way to describe pay schedules is as a combination of pay periods and pay dates. Your pay period determines the frequency in which your employees get paid, and the pay date refers to the day they receive their paychecks.
For example, you may select a semi-monthly payroll schedule where employees are paid for work cycles ending on the 15th and final day of every month. However, that doesn’t necessarily mean they will receive their wages on that day. For convenience, consistency, and easier time management, you might elect to conduct payroll on the following Friday. Sometimes, you might move the pay date forward to account for weekends or public holidays, etc.
While you might occasionally pay per diem employeeson a daily basis, it’s not a long-term solution or viable option for a growing team. There are four main types of pay schedules. Let’s take a look at each in detail and list some pros and cons to help you decide which salary pay schedule is right for your business.
Paycheck periods per annum: 52
Payroll date: Usually a designated day of the week (Friday is most common)
Weekly pay schedules work well for businesses in the hospitality and labor sectors where many employees are paid at an hourly rate, have irregular schedules, or require overtime payments. Weekly payroll is standard for businesses like bars, restaurants, retail stores, and construction companies.
Paycheck periods per annum: 26
Payroll date: Usually every alternate Friday
According to the US Bureau of Labor Statistics, this is the most common pay schedule used by American businesses. Like with weekly payroll schedules, pay dates are allocated to a specific day. The only difference is they are paid every fourteen days rather than every seven. Most of the time, this means two payroll dates per month. However, twice a year, there will be three — when the month begins on (or very close to) one of your pay cycle days.
Paycheck periods per annum: 24
Payroll date: Typically either the 1st and 15th or the 15th and 30th of every month.
As the name suggests, employees on semi-monthly pay schedules are paid twice per month, making this model very similar to making bi-weekly payments — which we’ve already established is the most common option among US employers. However, what is a semi-monthly payroll schedule used for and why would you choose this schedule over a bi-weekly model? Generally, the answer comes down to administration considerations and whether your staff are salaried or paid by the hour.
Paycheck periods per annum: 12
Payroll date: Usually the last day of the month
Monthly payments are the least common type of payroll schedule and are typically favored by particular types of organizations like finance companies and professional and business services. You’re probably thinking that a monthly salary pay schedule is a no-brainer in terms of ease and convenience — and you might well be right. However, there are some pretty significant disadvantages, so you’ll need to weigh up the pros and cons carefully.
Regardless of what other businesses might be doing, there’s no right or wrong answer to how often you run your payroll. As a result, it’s best to base your decision on what makes the most sense for you. However, once established, switching pay schedules can be challenging and time-consuming, not to mention frustrating for your employees. The bottom line is it’s essential to get it right from the get-go.
Before you make your decision, you’ll need to consider a few additional factors:
Ultimately, choosing a payroll schedule may not even be up to you, as many state laws stipulate minimum pay periods. Check the relevant State Payday Requirements carefully to see which regulations apply to your business.
For most small businesses, payroll is the largest single expense, so the rhythm of your company’s cash flow must be factored in before you choose a suitable payroll schedule. For example, does revenue flow through your company consistently every month, or are there peaks and troughs?
Under federal law, overtime rates need to be calculated weekly and factored into whichever model you choose. If you’re a small business owner running payroll yourself, this can be complex, confusing, and time-consuming.
The more payroll cycles you run, the higher your overall payroll processing costs will be.
Workers in some industries have set expectations of payroll frequency and may decide not to work for you if their compensation isn’t paid on a timescale that’s convenient to them.
Whatever schedule you choose, payroll’s no big deal with Roll by ADP.
Roll’s payroll mobile app is a completely reimagined way for small businesses to do payroll. Its conversational interface allows you to effortlessly and intuitively make payments in under a minute, on whatever device, whenever it fits your day. And the best part? There’s no need for clunky, old-school forms or static spreadsheets. Just one easy-to-use app that’s always in your pocket.
From setting up payroll to hiring your first employee, you do everything in the app through a convenient chat interface. No training needed — if you know how to text, you know how to run payroll with Roll. And our employee-friendly features and payroll self-service help your team roll with the flow, too.
Sign up for your free trial today, and get ready to Roll!
Free Trial