Payroll Scheduling: Do you set the schedule or does your state?
Payday is a day that all workers look forward to. As a small business owner, are you aware of the different ways you can run payroll and the schedules that exist? With weekly, bi-weekly, semi-monthly and monthly options you may be overwhelmed with which schedule to choose. However, in some cases, that choice is made for you depending on what state you live in. Here’s what you need to know when setting up a payroll schedule.
Listen To Your State
Before we break down each option in more detail, let’s first tackle your state laws. The United States Department of Labor (DOL) explains the requirements for each state. For example, if you work in California, the DOL states that you must pay weekly, bi-weekly or semi-monthly, however, there are occupation requirements for weekly and bi-weekly schedules that you would have to look into. On the flip side, in Pennsylvania, there are no requirements and the employer has full choice over when to pay employees.
To see the requirements in your state check out this information from the DOL.
Understand Your Options
Whether you get to choose your payroll schedule or have to follow the requirements from the DOL, it helps to understand what type of schedule you’re running.
Weekly: Employees will be paid once per week. This method would involve you spending the most time on running payroll, since it will be time every week, however it does work better in some industries than others.
Bi-weekly: Employees will be paid every other week, with a total of 26 paychecks for the year. Additionally, due to this schedule, there will be two months where an employee receives three paychecks. This is a predictable method and will be easy for you and your employees to follow.
Semi-monthly: Very similar to bi-weekly, except that employees will receive 24 paychecks for the year. Additionally, this could be helpful for running reports since the second paycheck will happen at month end, making it easy to collect all data at once.
Monthly: Employees will be paid once per month. This would be a beneficial option as a business owner as you only run payroll once a month, but it can create financial strain for your employees.
There is no one size fits all option for payroll schedules. Depending on your type of business, the employees you have, and your state, it can take some time to figure out which option is best for you. As mentioned, if you do have the choice, think hard about your decision and if you need more help you can always refer to our pros and cons list of each payroll schedule option.