Payroll Scheduling: Who Sets the Schedule? You or Your State?
Payday: it’s a day that pretty much everyone looks forward to. But when exactly pay day occurs varies from business to business. As a small business owner, do you know which payroll frequency/schedule your business should be using? With weekly, bi-weekly, semi-monthly and monthly options you may be confused about which schedule to use. It’s important to know that, in some cases, the choice is made for you based on the state in which you live.
Here’s what you need to know when setting up a payroll schedule.
It May Be State-d
Before we break down each option in more detail, let’s first tackle your state laws. The United States Department of Labor (DOL) site lists 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 check the requirements for your state check out this link from the DOL.
Understand Your Options
Whether you are able to choose your payroll schedule or have to follow the requirements set by your state, it helps to understand what type of schedule you’re running.
Weekly: Employees will be paid once per week. This method works best for certain types of work—for example, New York has a state-level requirement that manual workers be paid on a weekly basis.
Bi-weekly: Employees will be paid every other week, for a total of 26 paychecks for the year. Due to this schedule, there will be two months per year where an employee receives three paychecks. This is a predictable method that is easy for you and your employees to follow.
Semi-monthly: This option is most similar in frequency to bi-weekly, except that employees will receive 24 paychecks for the year, as they are paid twice per month. This can be helpful for streamlining reporting as 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 option is the least frequent and can therefore create financial strain for your employees. Some states allow for monthly payroll only for certain employee classifications, for example New Jersey allows monthly payroll for “bona fide executive, supervisory and other special classifications of employees”.
Note: Whichever schedule you are processing on, you’ll want to check designated pay days against weekends and bank holidays, as this might cause a pay date to shift.
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.
If you’re not sure what the payroll scheduling requirements are for your business, or need advice on what frequency would best fit your needs, be sure to consult your accountant or financial advisor.
This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.