A pay schedule might not seem like it is that complicated when you are starting up a business. After all, most companies operate on a bi weekly pay schedule or semi monthly pay schedule. Could it really be that complicated to organize the calendar with your payroll? It might surprise you that there are a few ways to coordinate how your staff is paid. When you are a business owner this matters since the buck ultimately stops with you.
What Is A Payroll Schedule?
There are a few factors to consider when choosing a pay schedule. Look at the kind of employees you have on payroll. Do they work the same amount week to week or do their hours fluctuate? Do you have employees with salaries or hourly wages? When it comes down to overall income how much are they earning in a usual pay period?
Several other components factor into creating a suitable pay schedule, namely taxes, employee benefits package costs and processing costs. The typical model is companies with hourly employees usually pay them each week. Small business a bi weekly pay schedule or semi monthly paydays. It all comes down to payroll taxes required for each employee as well as the number of people on your staff.
Types of Pay Schedules
In order to make sure your employees receive pay on time it is important to pick the right pay schedule. There are several kinds to choose from based on your business, size, and number of employees. Usually it comes down to picking a weekly, semi monthly, monthly, or bi weekly pay schedule. A few other templates for picking dates to disperse payroll exist, though are not as frequently used.
Weekly Pay Schedule
This is a great way to get hourly employees their checks on a consistent basis. Using weekly pay periods can be more costly. Payroll companies tend to have a higher price for each processing payroll for a company. While it might make your employees happy you might be finding it to be a much more expensive pay schedule.
Bi-Weekly Pay Schedule
Using bi weekly pay periods means adding funds to your employees pockets twice a month, depending on the structure of the month, on the same day of the week. Fridays tend to be the most popular day and one that employees can count on being paid. Outstanding taxes or benefits-related costs might be associated with using a bi weekly pay schedule. Check with your accounting department to see if it’s a right fit for your business.
Semi-Monthly Pay Schedule
Like the biweekly model the semi monthly pay schedule specifies certain dates employees can expect their wages. The 1st and the 15th or the 15th and 30th of the month are typical paydays companies use. Were either of the two dates to fall on a weekend companies can make the choice if employees are paid the Friday before or Monday afterwards. Just like a bi weekly pay schedule research tax, healthcare costs and regulations prior to implementation.
Monthly Pay Schedule
Small businesses do not frequently use a monthly payroll schedule. This timeline of paying employees is typically reserved for contract-based or freelance employees who get paid once a month. This pay calendar comes with heavy regulations set forth by the Department of Labor (DoL). You will need to contact your state to see if laws permit a monthly payroll schedule.
Factors To Consider When Choosing A Pay Schedule
Before deciding on whether you want to go with a monthly, weekly, or bi-structured pay schedule you need to take a few things into account. Your business’ cash flow and budget, your employee’s needs, and the associated costs with payroll all factor into the final decision.
Cash Flow And Budgeting
The amount of incoming funds your company receives on a regular basis determines how often you can pay your employees. You want to make sure your accounts have enough funds in them to pay your employees, as well as your other bills and expenses. Work with your accounting team to see when money comes into your budget before setting up a payroll calendar.
Employee Preferences And Needs
Your workforce is who you are paying. If you are asking them to plan on working on a week to week basis then perhaps weekly pay periods make sense. If you are hiring contractors who can complete the work over the course of 30 days then perhaps going with a monthly pay schedule is the right answer. Speak with your staff to see what works best for them and what would be ideal in terms of a consistenty.
Administrative Costs And Workload
No matter what pay schedule your company ends up there will be expenses attached. Taxes, benefits, and regulations all factor into the ultimate cost. Some schedules, such as weekly pay periods, have a higher payroll fee associated while others like monthly payroll schedules are managed state-by-state. You will also want to check with your accounting team to see if you are adding additional labor to their plates choosing one.
Payroll Processing And Software
Integrating payroll software into your accounting software streamlines time and attendance systems. This can lead to a consistent and accurate pay schedule because employees hours worked are logged into the record minimizing mistakes, such as double entry. This software is not cheap, nor is it always easy to learn or add to your current systems. Ask your payroll head what might be a good fit for your company.
Legal Requirements And Compliance
Depending on what industry your business operates in there might be additional legal requirements and compliance fees associated with your payroll. No matter what pay schedule you choose, taxes are going to remain a consistent shaping force behind when and how your employees are paid. Make sure to double check what the legalities are for how your company pays its workforce before establishing a payroll schedule.
Frequency And Volume Of Overtime
Employees that work overtime are getting paid for more hours than usual, as well as at a higher rate. Can your budget afford it and can your payroll keep up with the work logged? Bring your accounting and payroll teams together to prepare them for any inconsistent or unusual pay schedules happening due to overtime. Let your employees know the proper way to record overtime so they are paid correctly and on time.
How To Choose The Best Pay Schedule For Your Business
Depending on the size of your business there are a few important d factors to analyze for a pay schedule. Look at how much your employees are working. Determine how much income your company generates in a certain time period. Ask your accounting team how much different payroll structures cost and if there are additional fees or compliance expenses that need to be factored into the schedule. Making sure to see if your employees prefer a standard bi weekly pay schedule or one that is weekly or monthly will keep them informed, not to mention happy.
Conclusion
Understanding the needs of your employees and the unique qualities of your business will help you set up a pay schedule that works for your company. Establishing payroll schedules comes down to size, budget, laws, calendaring, and what suits your workforce best. Discuss with your payroll and accounting teams what payroll schedules might be a good fit for your organization. Bring some options to your employees to get their take on it. From there, choose a pay schedule that is consistent for paying your staff.
FAQs
Why is the pay schedule important?
Employees need to know when they are getting paid on a consistent basis and having a pay schedule in place informs them of when they can expect to receive their wages.
