How Many Pay Periods Per Year Work for Your Business?

Running your business involves many key decisions, including how and when to pay your team. The pay period you choose impacts your payroll processes, employee satisfaction, budget, and compliance. Discover the various types of pay periods in this guide and learn how to choose a schedule that suits your needs.

What are Pay Periods?

A pay period is the recurring schedule you use to calculate and send out employee paychecks. It determines how often you pay your team and how you track work hours and taxes. The best pay period for your business depends on your industry and whether you have employees or contractors. It also involves local labor laws and any practical factors specific to your business. As a small business, you should verify that you’re staying compliant with your chosen pay period.

Common Pay Periods

When setting up your payroll, picking the number of pay periods in a year is a decision that affects your employees and your operations. Here are the four most common pay schedules used today:

Weekly

You pay employees once a week, usually at the end of the workweek.

• Number of Pay Periods per Year: 52

• Who Uses it: Industries with hourly or shift-based workers. Examples include retail, restaurants, construction, and manufacturing.

• Why Choose it: Employees receive regular paychecks, which can help them manage weekly expenses. However, it can mean more payroll processing work for you.

Biweekly

Employees receive a paycheck every two weeks, typically on the same weekday.

• Number of Pay Periods per Year: 26 (sometimes 27, depending on the year)

• Who Uses it: Businesses of all sizes, especially if they have both hourly and salaried employees.

• Why Choose it: This option enables you to strike a balance between regular paydays and manageable payroll processing. Employees appreciate consistent every-other-week paydays.

Semi-Monthly

You pay employees twice a month on set dates, such as the 1st and 15th or the 15th and last day of the month.

• Number of Pay Periods per Year: 24

• Who Uses it: Businesses with salaried office employees and professional services.

• Why Choose it: Paydays usually fall on set dates, either at the beginning/middle or middle/end of the month, which aligns well with rent or mortgage due dates. Each paycheck is the same amount, which can simplify your bookkeeping and accounting.

Monthly

Employees receive one paycheck per month, usually on a consistent date.

• Number of Pay Periods per Year: 12

• Who Uses it: This option is less common in the U.S., but some businesses use it for executive roles or industries where employees are primarily salaried.

• Why Choose it: It reduces your payroll processing time, but it means your employees may need to budget carefully.

How to Choose the Right Pay Period for Your Business

Choosing the best number of pay periods in a year for your business requires a thoughtful approach, with your employees at the forefront. It depends on various factors:

• Industry Norms: Some industries favor weekly or biweekly pay to meet employee expectations.

• Workforce Type: Hourly workers often prefer weekly or biweekly pay, while salaried employees may be comfortable with semi-monthly or monthly paychecks.

• Cash Flow: Consider how your revenue cycles line up with your payroll obligations. More frequent pay periods can strain your cash flow if you don't plan carefully.

• State Laws: Some states have requirements for minimum pay frequency, especially for hourly workers. Make sure your pay period aligns with local regulations.

• Administrative Costs: Running payroll more frequently means more time spent processing payments and filing tax paperwork. It can be costly. Choose a schedule that balances employee needs with administrative efficiency.

Working with a payroll partner such as Justworks can streamline these time-consuming tasks by automating payroll deductions and keeping your payroll process organized. Payroll automation further simplifies the process by reducing errors and freeing up your team to focus on more important tasks.

If your business is growing and you're managing employees in multiple states, a Professional Employer Organization (PEO) can further simplify payroll and HR tasks, ensuring everything runs smoothly across locations.

Pay Periods' Impact on Employees and Payroll Processing

Your pay schedule determines how often employees receive paychecks. It affects how much they need to budget until the next payment. In terms of payroll processing, it can also influence the following:

• Overtime Calculations: You typically calculate hourly workers’ overtime based on a standard workweek. Weekly or biweekly pay periods make it easier to track and manage overtime pay.

• Benefits and Deductions: The number of pay periods in a year affects deductions for benefits such as health insurance premiums or retirement contributions. Switching from biweekly to semi-monthly or monthly might change the amount you deduct each cycle.

Support Your Payroll Process with Justworks

Choose a pay period that keeps your team consistently paid on time and supports smooth organization as your business scales. Justworks offers solutions to simplify your payroll processing and automate employee time-tracking. Manage your payroll and HR tasks in one place to save time and minimize errors, so that you can focus on your business. Get started with Justworks today.