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While business leaders expect payroll to be among their biggest line items — as much as 70% of their total expenditures — they might not realize the impact their payroll schedule has on the company and its cash flow. Although there isn’t one best payroll schedule for all businesses, you should consider how your options influence operations and financial safety nets before choosing one.
Below, we’ll break down the factors that go into choosing a payroll schedule and how to determine the best one for your business.
Your payroll schedule determines how long your pay periods are and how often you pay your employees. By association, it also dictates how often your team must execute the administrative work involved and how often the outflow of cash will impact your finances.
It’s important to note, however, that payroll schedules and pay dates aren’t the same. So, if your payroll schedule concludes on a Friday, that doesn’t automatically make it payday. Employers do have some flexibility, but it depends on your state laws.
For example, payroll laws in Iowa require businesses to pay their employees within 12 days of their pay period’s end. In California, that limit is seven days.
Here are more payroll terms and their definitions to keep in mind:
While most states provide some flexibility, numerous laws and regulations stipulate requirements for a business’s payroll schedule. These rules may preemptively decide your schedule for you, as noncompliance comes with significant penalties. The U.S. Department of Labor provides a quick-reference guide to check whether state laws will affect your payroll schedule.
Several factors also influence your schedule, including:
Per the U.S. Bureau of Labor Statistics (BLS), the most common payroll frequency is biweekly, accounting for 46% of businesses. While there are many reasons a business may choose this schedule, it’s important first to weigh the pros and cons of each option to determine the right choice for your business.
Weekly payroll schedules are the second most common schedule adopted by U.S. businesses, accounting for 32% of businesses in the nation. Weekly schedules are often used by companies with primarily manual or minimum wage or hourly labor, such as construction and food service. With this schedule, employees receive 52 checks per year.
As one of the most balanced schedules, biweekly payroll scheduling is the norm for a significant portion of businesses and their employees. With this schedule, employees receive 26 checks per year.
Biweekly payroll schedules are more common for businesses with a mix of salaried and hourly employees if they have fairly set scheduling, such as office work.
Semimonthly payroll schedules operate closest to biweekly structures but eliminate the occasional third check. On a semimonthly schedule, your payroll cycle will no longer conclude on the same day of every week. For example, instead of pay periods concluding every other Friday, employees are paid on fixed numerical days of the month, like the 1st and the 15th, with some variations due to holidays.
Semimonthly payroll schedules are most common for businesses with primarily salaried employees.
Monthly payroll schedules tend to work for certain types of professionals. Business owners, in particular, commonly follow a monthly pay period because it’s easier for them to adjust to the needs of their business. For example, if cash flow is tight, they might forgo that month’s paycheck. As noted above, executives and administrators may be paid monthly in accordance with state laws.
Some professions may also operate on payroll schedules longer than a month, but this is rare. For example, loggers and farm workers in Wisconsin are only required by state law to be paid quarterly.
Depending on your operations and distribution of hourly and salaried employees, you may be interested in offering multiple payroll schedules simultaneously.
While this method allows a business to understand labor costs by category better, it may cause more of an administrative burden. This strategy isn’t for everyone and may make the most sense for larger businesses with multiple divisions or departments.
For combining multiple schedules, remember:
Businesses looking to streamline their payroll processes and eliminate the administrative burden, no matter their schedule, can partner with BBSI to make it happen.
Working alongside a local Business Unit gives you access to a dedicated team of professionals who will provide critical payroll guidance. Once you’ve determined your ideal schedule, our robust, proprietary myBBSI system allows you to manage and customize it with ease — including elements like PTO plans and tax obligations.
The payroll services provided by BBSI will also minimize the amount of time your business loses to payroll administration. With BBSI, you can rest assured your payroll will be completed accurately and on time.
Contact your local BBSI branch today to get started.