Which Payroll Schedule Is Right for Your Company?

Are you just setting up a new company? It can be an amazing and exciting time with all the new technology in place to help make your company a success. You can even decide to hire just remote workers to save on the costs of running an office.

But in order to achieve any of that, you need to decide on the payroll schedule. How often will you pay your workers? And what impact will that have on your business?

Here’s everything you need to know.

1. Monthly

The longer the pay period the more money you need to pay out at once. Paying your workers monthly might be advisable if you are a company with a lot of outgoings but your clients are billed monthly.

You need the capital in your company bank account to be able to pay employees wages.

Remember that paying monthly is also a way to reduce the level of paperwork in terms of paystub documents and pay periods.

A disadvantage of paying workers’ monthly – a monthly payroll period – is that it means you have to keep track of what a worker has earned for a longer period. There are going to be times when a worker might end up questioning a pay period but since it happened a while back it is harder to prove.

2. Weekly

A weekly pay packet might motivate your employees more. If they are paid weekly they might be more motivated to work and feel happier.

They will worry less because they will know that if they do spend all of their money in one week it won’t be long before it’s time for another pay packet.

Weekly pay packets, however, can be an administrative nightmare. They mean that HR and accounts have to run a payroll every week and this might distract from other tasks they have to do.

Another disadvantage is that the company does not have any cushion. This means if a supplier or customer falls through at the start of a month the company has three to four weeks to find the money to pay its employees.

On a weekly payroll, this cushion does not exist and could lead the company coming into immediate trouble if there was a cash-flow problem.

3. Bi-Weekly

A bi-weekly payroll is a perfect compromise between a monthly and weekly payroll. It takes off the pressure from having to pay employees weekly but means employees don’t get restless or nervous about waiting to get paid.

There are very few employers who pay their employees bi-weekly. It can become confusing as employees struggle to remember which week they are on and what day of the week they are going to get paid each month.

It can also change every month as there are fewer weeks in some months which lead to even more confusion

With a monthly payroll, it is always clear on which day you will be paid. Usually, it is the last working day of the month or the same day every week such as Friday.

If you are struggling with payroll be sure to get this payroll company to help you set up your payroll.

A payroll company can even help you manage more complicated processes such as payroll giving to charities.

4. Contract Pay

Another consideration to make is whether you want to pay your employees a fixed fee on contract work instead. There are many benefits to this for the employee.

They could get the whole or a fixed amount of the money upfront to fulfill their contract. If both parties were in agreement the contract could be renewed at the end of the period.

It means that payroll takes place for that employee at the beginning of the pay period and is not an on-going issue and once they are paid that money is accounted for. 

The downsides for workers on a contract is that they don’t necessarily have the same job security as someone on a continuous payroll.

But you can work around this if you provide a clause in the contract that makes renewal virtually certain so long as the employee has not breached the terms of their previous contract and carried out the work to an appropriate standard.

Contract pay is a great way of employing people who are ambitious and who might want to a pay increase every few months to stop them moving on to rival firms and to ensure they are satisfied with their current role.

Remember to add on any payroll tax cut to your employees regardless of whether they are on contract payroll or monthly payroll.

Getting Your Payroll Schedule Right Is Important

Getting your payroll schedule correct is important for so many reasons. You need to ensure that your employees feel comfortable with the schedule that they get paid.

If they are paid too infrequently then they may feel that they run out of money too quickly and they may also worry that if the company came into financial difficulty they might not get paid. This also means you have to run payroll more often which be a logistical challenge. As a company, however, you have to balance their needs with your own needs.

Having a long pay period can create a cushion of a few weeks if there was an issue with cash flow because a supplier or a customer hadn’t paid up. However, a longer pay period such as monthly payroll means you have to pay out larger sums every month that can be a burden on the company.

Disputes about pay can also be heightened if the pay period is monthly. Employees and managers might find it more difficult to find evidence of when a pay period took place.

If you are interested in reading more about how to set a payroll schedule or bi weekly vs semi monthly payroll then be sure to check out the rest of our site.