Determining the ideal time to deliver payroll may sound simple. Cash flow needs, state regulations, overtime rules, and the types of workers or contractors you hire are all accounting factors to consider for your payroll schedule. You need to also take into account what is best for your staff and for your business. Paying too often can give you administrative headaches, but not enough can be a negative impact on morale. Today, we at Mark Dicus & Company would like to elaborate on scheduling your small business’s payroll. In the United States, there are four common types of payroll schedule frequencies and they include weekly, biweekly, semi-monthly and monthly. Surrounding pay schedules, most states have regulations that must be adhered. In order to ensure compliance, consult the U.S. Department of Labor website and find your state.
Weekly Pay Periods
Once a week on a specific day with 52 paychecks. Receiving weekly paychecks is likely preferred if your staff consists of hourly workers. Because there are processing costs each time you run payroll, it may not be the most cost-effective option.
Biweekly Pay Schedule
Once every 2 weeks on a specific day with 26 paychecks. Payroll is administered every other week on the same day, usually Friday. There will be 26 paychecks since there are 52 weeks in a year. Since 26 does not divide evenly into 12, it is important to note that two months out of the year will have three paychecks. Because each pay period has the same number of days bi-weekly payroll schedules define calculating overtime. Being that they are not paid on the same date each month, one of the main drawbacks is that workers who are paid bi-weekly may find it a bit trickier to budget, however.
Semi Monthly Pay Period
Twice a month on 2 specific days with 24 paychecks. When it comes to payroll, though bi-weekly and semi-monthly may sound like equivalent terms they have distinct difference. Employees receive twice monthly paychecks on the same dates each month in terms of semi-monthly. Though this is often on the 1st or 15th of the month, you can choose the dates. In managing their own finances, employees who are paid semi-monthly benefit from predictability. Being paid on fixed dates twice per month makes it easier for them to set up auto payment options for their bills.
Monthly Payroll Schedule
Once a month on the specific date with 12 paychecks. For freelancers or contract-based workers, like graphic designers or copywriters, monthly is ideal.
Calculate Cash Flow
To help you better plan your payroll schedule, have a good handle on the timing of your cash inflows and outflows. In order to handle those months that will have an extra pay period it means that you will need to have accurate cash flow projections if you choose a bi-weekly payroll schedule. Securing alternative financing options in advance is prudent for small business owners. For instance, having a line of credit might come in handy if necessary, to process payroll.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
There are many factors you need to consider, and with the help of Mark Dicus & Company we can help you find the right payroll schedule and the accounting expertise you need to help your business be a success.