The Payroll Blog

News, tips, and advice for small business owners

Advantages of Monthly Payroll vs. Quarterly Payroll

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As you attempt to settle on a particular payroll schedule, you will find that there are multiple options – some of which are going to be better for your business than others.

Comparing the advantages of monthly payroll vs. quarterly payroll will open your eyes to a variety of benefits and drawbacks. To compare monthly vs. weekly payrolls, see our previous blog post on the topic.

Quarterly payroll is out of the question for most organizations. The main reason for this is simple to understand: an employee needs to be paid more than once every three months. An employer who follows this payroll schedule will have a difficult time attracting new employees and retaining those who are already with the company. Employees have all different types of financial needs depending on their family, home and health needs. Many require a much more regular payment schedule.

Some of the many advantages of monthly payroll, when compared to the quarterly option, include:

  • Better suited for most employees
  • Easier to stay organized in terms of paying the required taxes and withholding the proper amount from each employee's paycheck
  • Less chance of not having the money necessary to pay taxes when they are due

While there is no federal law mandating how frequently an employ must be paid, each state has its own wage laws. For this reason, quarterly payroll may not even be an option.

Typically, monthly payroll is best for companies that have salaried workers who are exempt from working overtime.

With monthly payroll, as opposed to quarterly payroll, it is easier for the employer to ensure that they have enough cash on hand to pay all applicable taxes as well as withholdings for employees based on the requirements of the IRS, state and local taxing authorities.

Relying on a quarterly payroll schedule can lead to issues in many areas including cash flow, missing scheduled payments and withholding errors. To avoid this, without moving to a weekly or bi-weekly schedule, set up a monthly payroll process. It will make you more competitive with other similar companies in terms of standard offerings and it will help you avoid the above mentioned complications.