A pay period, also called payroll period or payroll frequency, is a range of time during which the work of your employees is tracked and paid.
Pay periods vary by company, and are typically weekly, bi-weekly, semi-monthly, or monthly. The payday may be on the last day of a pay period, but not necessarily. Sometimes the HR department needs a few days to calculate all the wages and hours and then pay the employees, even if they use payroll software.
Types of pay periods in the United States
Different types of pay periods are based on the length of time between two pay dates. Pay frequency depends on many factors concerning both the employer and the employees. The most common pay periods are:
Monthly pay period
A monthly pay period means an employee will receive 12 paychecks within one calendar year.
In the United States, each state has its own state laws signed off by the Department of Labor when it comes to pay frequency. In many states, different pay periods are permitted.
For example, in Iowa, there isn’t a specific payroll schedule an employer needs to follow, but the employees need to receive their payment at least once a month. Their payday also can’t be more than 12 days after the pay period in which they’ve earned their wages, regardless of whether they’re hourly employees or salaried employees.
Other states with a monthly pay schedule (in some, under specific circumstances) include Alaska, California, Illinois, Michigan, Nevada, North Dakota, and Washington.
Semi-monthly pay period
A semi-monthly pay period means your HR department will need to process payroll twice a month. An employee that’s paid semi-monthly will receive 24 paychecks within one calendar year.
Typically, one pay period runs for the first half of the month (June 1 to June 15) and the second period runs for the second half of the month (June 16 to 30).
The length of the pay period will depend on the number of days within the month. For example, February has shorter pay periods since it’s the shortest month of the year. You need to pay attention every leap year, too, since you’ll have an additional day in February.
States in which you can pay your employees on a semi-monthly basis include Arizona, Delaware, Hawaii, Kentucky, Maryland, New Mexico, and Virginia.
Bi-weekly pay period
Unlike the semi-monthly pay period, which depends on how many days there are in a month, if you choose the bi-weekly payroll, the length of the pay period is always the same: two weeks.
However, you may notice some years will have an extra pay period. That happens every four years when your employees will have 27 instead of 26 paydays, due to February having 29 days, so the number of pay periods for this type of schedule increases by one.
The bi-weekly schedule is an ideal solution for many businesses. Employees are happy with the more frequent cash flow because they have access to their salaries and wages more often. On the other hand, the predictive number of paydays and length of time between two paydays gives the employer time to do their budgeting and payroll processing in a more organized way.
You can pay your employees bi-weekly in states such as Indiana, Louisiana, Mississippi, Rhode Island, and Virginia.
Weekly pay period
Sometimes employees get paid on a weekly basis. Their annual pay is divided into 52 payments within a calendar year.
Weekly payroll usually means employees receive their paychecks on the same day of the week every week. In many companies, payday is on Friday, since it’s also the end of a workweek.
Weekly payments are common in the US and are allowed in many states, including Connecticut, Iowa, Massachusetts, New Hampshire, New York, and Vermont.
What can affect your pay cycle?
There are several factors that can affect your decision on how to pay your employees.
Your budget—how much running payroll is going to cost you and what your cash flow looks like. When you pay your workers more often, payroll costs are higher, and it’s challenging to find a balance between meeting your employees’ wishes and your abilities.
For example, many employees want to be paid bi-weekly, but that can cause expense accrual because two months per year will have three paydays instead of two.
The number of employees you have (the size of your business)
Taxes, benefits, and other employer contributions that are involved in your employees’ compensation
The type of payment your employees receive (hourly wages or salary)
The employee’s position
Your business industry
Choosing your ideal pay cycle
How you run payroll depends on many factors, but you also have many options. If you trust a good payroll service with your payroll cycle, paying your employees instantly becomes less demanding, time-consuming, and complicated.
The good news is, you can always change your pay schedule as your company grows—just make sure you’re compliant with the laws in your state.