What’s the Best Payroll Schedule for Your Business?

What is a payroll schedule?

A payroll schedule is the frequency with which you pay your employees. For example, if you pay your employees twice per month, your payroll schedule is semimonthly (sometimes called “bimonthly,” though this is a misnomer when it comes to payroll, as that could also mean “every other month”).

Your payroll schedule forms the basis of your payroll timeline and operations, and it can affect your payroll budget and your employees’ cash flow. Additionally, your business’s size or industry may make one payroll schedule more appropriate than another.

What are the types of payroll schedules?

There are four primary types of payroll periods: weekly, biweekly, semimonthly and monthly.

• Weekly: On a weekly payroll schedule, you pay your employees every week, typically on the same day of the week. You process payroll 52 times per year and issue each employee 52 paychecks (or direct deposits) over the year.
• Biweekly: When you opt for a biweekly payroll schedule, you issue employee paychecks every two weeks. You distribute your paychecks on the same day of the week, every other week. Employees who are paid biweekly receive 26 paychecks per year.
• Semimonthly: On a semimonthly schedule, you pay your employees twice per month. The same is often true for biweekly pay, so these payroll schedules are often falsely conflated. Semimonthly pay results in two paychecks per month and 24 employee paychecks per year, whereas biweekly pay sometimes results in three paychecks per month. Semimonthly paychecks are thus larger than biweekly paychecks.
• Monthly: With a monthly pay schedule, you pay your employees once per month, resulting in 12 payroll runs per year. You’ll likely issue monthly paychecks on the same day of the month, perhaps the first Friday of the month. You could also distribute monthly wages on the first of the month.

According to the U.S. Bureau of Labor Statistics (BLS), biweekly pay is the most popular payroll schedule. The BLS says 43 percent of businesses use biweekly pay schedules, with weekly schedules taking second place, at 27 percent. Semimonthly pay ranks third, at 19.8 percent, and monthly comes in last, at 10.3 percent.

What are the pros and cons of each payroll schedule?

To help you decide which option is best for your business, we’ve listed each schedule’s advantages and disadvantages below. (Note that you can run more than one pay schedule. For example, some businesses pay hourly employees weekly and salaried employees biweekly.)

Weekly payroll schedule pros and cons

These are some of the advantages of weekly payroll schedules:

• Better cash flow for employees: The more frequently you pay your employees, the more quickly they’ll have access to their wages. They’ll enjoy a more fluid cash flow, which can boost their financial stability. This is especially true for lower-wage employees, for whom even small sums may be vital.
• Easier overtime calculations: If you have exempt employees, their paychecks will be the same each week, regardless of how many hours they work. However, the Fair Labor Standards Act dictates that nonexempt employees must be compensated with overtime pay if they work more than 40 hours per week. You’ll need to pay these employees time and a half for their overtime hours. Adding overtime wages to your paychecks is much easier on a weekly pay schedule. Because you’ll likely track overtime weekly, you’ll multiply the week’s overtime hours by your overtime wage rate and add the result to your paychecks.

These are some drawbacks of weekly payroll schedules:

• Higher payroll fees: Some payroll services cap how often you can run payroll without extra fees. At 52 payroll runs per year, weekly pay is the schedule most likely to take you past this cap. As such, weekly pay schedules may boost your payroll expenses. However, you can avoid this issue if you search for options that don’t charge for extra payroll runs when you choose a payroll service provider.
• Higher mailing costs: If you don’t have paperless payroll and are still printing paychecks, weekly pay schedules can be more expensive. Each of the 52 payroll runs you execute per year requires check stock, magnetic ink or toner, envelopes and stamps. You’ll expend these resources considerably more rapidly with a weekly schedule, thereby increasing your restocking costs.

Biweekly payroll schedule pros and cons

These are some reasons why biweekly is the most popular schedule:

• Predictable pay cycles: With biweekly pay, you know you must process payroll every 14 days. Plus, your checks will likely be issued on the same day of the week each time, so your payroll deadlines will be crystal clear. Your employees will also know exactly when to expect their paychecks, which will make personal accounting and budgeting easier.
• Easier overtime calculations: Like weekly pay, biweekly schedules streamline overtime accounting. In contrast, semimonthly or monthly options often split workweeks between pay cycles, making overtime calculations more challenging.

Although a biweekly pay schedule is highly popular, it does have some drawbacks:

• Variable pay dates: Although you’ll know your paychecks will go out every other Friday, you’ll have to check the calendar for the actual pay dates. Some might prefer the same pay dates every month.
• Higher payroll costs: While biweekly payroll schedules are less expensive than weekly schedules, costs can still add up. However, this won’t be an issue if you choose a payroll service provider with unlimited payroll runs.

Semimonthly payroll schedule pros and cons

Here are some reasons why a semimonthly payroll schedule might suit your business:

• Consistent paydays: With a semimonthly schedule, you’ll always pay your employees on the 15th and 30th of the month. Yes, you’ll have to make minor adjustments for holidays and weekends, but you can easily do so through your payroll software.
• Easy withholding calculations: Because you’ll always issue two employee paychecks per month on a semimonthly schedule, you’ll withhold the exact deduction amounts in every paycheck. This structure makes it much easier to properly collect payroll taxes and pay benefit premiums. It also makes it much simpler to incorporate the costs of new benefits into future paychecks.

On the other hand, some businesses might want to avoid semimonthly payroll schedules for the following reasons:

• Challenging overtime calculations: Workweeks that start in one month and end in another are inevitable. They also make overtime calculations more challenging, as overtime hours from the same workweek can land in two different months. This separation can confuse employees who are wondering whether they’ve been paid accurately. It can also confuse you when you’re calculating payments.
• Overall high number of payroll runs: Semimonthly payroll schedules are less frequent than weekly or biweekly schedules, but they are still more frequent — and, therefore, can be more expensive — than monthly payroll schedules.

Monthly payroll schedule pros and cons

Though few businesses use monthly payroll schedules, they do bring some benefits: 

• Low payroll costs: A monthly payroll schedule means you’ll process payroll 12 times per year and minimize any extra payroll costs.
• Extremely easy deduction calculations: With just one monthly check, you won’t have to divide benefit premiums across several paychecks. You’ll reduce the potential for human error and save yourself some tedious work.
• Less work overall: The fewer times you run payroll, the less work it requires. And with monthly payroll schedules, you run payroll at most half as often as with other schedules. 

However, monthly payroll is used infrequently, largely because of these drawbacks: 

• Employee unhappiness: How would you feel waiting a whole month to be paid for your work? How would you feel planning a month’s worth of expenses with just one paycheck? Your answers might be “bad” and “bad.” No matter how much work and money a monthly payroll schedule saves you, do you really want to have that effect on your employees?
• Infeasibility for hourly employees: Between overtime concerns and the lower wages often associated with hourly work, monthly payroll schedules are a no-go for hourly employees. Workweeks split into months can be problematic when you’re calculating monthly overtime pay. Also, low-wage employees often can’t wait an entire month to receive their pay.
• Potential legal concerns: Some states have laws banning monthly payroll schedules in many or all circumstances. It’s crucial to consult an expert so you don’t find yourself in hot water.

Which types of businesses benefit from each payroll schedule?

According to BLS data, specific industries gravitate toward particular payroll schedules. 

• Weekly pay: BLS data says weekly pay is standard in industries like construction,​​ manufacturing and trade. These industries hire many hourly, lower-wage workers, which explains the prevalence of weekly payroll schedules in these sectors.
• Semimonthly and biweekly pay: Semimonthly pay is common in information, finance and professional services. However, biweekly pay schedules are even more prevalent in these industries. Biweekly pay generally increases in prevalence as business size increases, though it’s common for all businesses.
• Monthly pay: No industry is particularly drawn to monthly pay. The BLS found that 14.5 percent of companies with fewer than 10 employees use monthly payroll schedules — much higher than for companies with 10 or more employees. 

What to consider when choosing a payroll schedule for your business

Here are some additional factors to consider when you’re deciding which payroll schedule is the best fit for your business.

• Legal regulations: When setting up your payroll schedule, you must comply with all local, state and federal laws, including federal overtime rules.
• Employee needs: It’s not just about what works for you as an employer; you should also consider your employees’ needs.
• Cashflow cycles: Your payment schedule should align with your typical rate of incoming revenue.
• Payroll costs: You must consider any fees incurred by payroll runs.
• Deduction calculations: A weekly schedule can be challenging for healthcare deductions and other employee benefit costs. 

Best payroll software for managing pay schedules

Our detailed reviews of the best payroll services can help you select the right partner for managing pay schedules and payroll runs. 

• QuickBooks Payroll: As a full-service payroll provider, QuickBooks makes it a breeze to set up an automated payroll schedule. You won’t have to worry about manual work after setup. However, if you need to make changes, you can easily do so before a payroll run. Learn more in our QuickBooks Payroll review.
• OnPay: OnPay is a great choice if you must run multiple payroll schedules. For example, you can pay full-time staff biweekly while running payroll for contractors weekly. Our detailed OnPay payroll software review highlights this platform’s robust features and integrations.
• Paycor: This platform lets you run payroll and all of your workforce management features in one place. It also has built-in features to ensure full tax compliance. Our comprehensive Paycor HR software review explains how the platform’s AutoRun feature lets you automatically set up a payroll schedule.
• ADP: ADP is a popular payroll option that syncs employee attendance with payroll calculations. It also handles all benefits and tax deductions to ensure payroll accuracy. Learn about this platform’s extensive features in our ADP payroll software review.
• Gusto: Gusto is an excellent choice for small businesses. You can run multiple payroll schedules with different payment options, including direct deposit, checks or pay cards. Our Gusto payroll review highlights this platform’s ease of use and helpful HR services. 

How to change your payroll schedule in your payroll software

If you’re convinced that a payroll schedule change is in order, payroll software makes it easy to switch it. You’ll log in to your account, look for a payroll menu in the navigation panel, and change your payroll frequency there. In some cases, you can also set different payroll schedules for various employee groups.

Here’s how to change your payroll schedule in QuickBooks Online: 

1. Select Payroll, and choose Employees. 
2. Select the employee’s name. 
3. Navigate to Employment Details. 
4. Choose Start or Edit.
5. Select the Pay Schedule drop-down menu, and choose a schedule. 
6. If you must create a new schedule, go to “+Add pay schedule” and complete all required fields.
7. Select Save.

Set the best payroll schedule for your business

The best payroll schedule for your company depends on your business’s specific needs. Depending on the types of employees on your team, you might even need to set multiple payroll schedules to accommodate them. The important thing is to make the best choice for your business. And when you’re ready to set everything up, the right payroll software can make the process a breeze. 

Natalie Hamingson contributed to this article.