A pay period is a recurring schedule that determines how often you’ll pay employees. Having a simple, predictable process ensures workers receive pay for their labor on a regular basis. It also simplifies monthly reporting requirements for expense accruals, tax deposits, and insurances.

Payroll impacts businesses and their employees alike. It shapes every financial aspect of the company, from cash flow prediction to expense reporting. That’s why it’s important to understand pay periods and how to choose the right one for you.

Weekly Pay Periods

A weekly pay period consists of seven days. For a full-time employee, each pay period generally consists of a 40-hour workweek. State overtime rules vary based on your place of business

Weekly is the preferred pay period cycle for most hourly workers. It makes cash flow and budgeting easier. From a payroll perspective, this is the most expensive to process because there are 52 payroll cycles in the year. Those payroll processing fees add up!

Advantages

• Employee gets paid very often (52-53 pay periods)
• Budgeting and cashflow are simplified
• Payday generally occurs on a Friday, 4-5 days after the period has been closed out.

Disadvantages

• Payroll processing fees are higher due to more frequent payroll cycles
• Employer accrual expense reporting happens more often
• Pay periods can often extend into the next month

Bi-weekly Pay Periods

A bi-weekly schedule consists of 26 pay periods in a year. Each pay cycle generally consists of 80 hours for a full-time employee. This can vary for any other hourly employees.

Like the weekly pay period, a bi-weekly pay period will always begin and end on a specific day of the week, usually Friday. The employer will generally deliver payroll checks to the employee on the following Friday. Bi-weekly is common for both salaried employees and hourly workers.

Advantages

• Employees get paid often (26-27 pay periods)
• The payroll department has more time to review timecards
• Payday generally occurs on a Friday, 4-5 days after the period closes

Disadvantages

• Payroll processing fees are still higher than other less frequent payroll options
• New employees may need to adjust to longer pay periods
• Complicates bookkeeping when compared to weekly

Semi-monthly Pay Periods

A semi-monthly schedule has 24 pay periods in a year. Each month will always have 2 work periods. Generally, a company may have a pay period that runs from the 1st-15th and the second pay period from the 16th–last day of the month.

Since this pay cycle doesn’t always end on the same day of the week, it can create challenges. Employees get paid on the next possible business day after the work period ends.

Advantages

• Employees get paid often (24 pay cycles)
• Hours worked will always remain in the month for that work period
• Simplifies employer accrual expense reporting requirements by reducing frequency

Disadvantages

• May not be allowed under your jurisdiction
• Can confuse employees
• The pay period often ends on a different day of the week

Monthly Pay Periods

A monthly pay period consists of 12 pay periods per year. Each month will represent the total hours for that month. This is the least costly from a payroll perspective. However, it can be challenging for employees to only get paid once a month and budget accordingly. Many consultants or freelance professionals use this method.

Advantages

• Great for freelance business owners or contract employees
• Simplifies accounting
• Decreases processing time

Disadvantages

• Payroll processing fees are low due to less infrequent payroll cycles
• Cash flow prediction can be more challenging
• Some vendors or contractors may take issue with this payment schedule

Take the Stress Out of the Payroll

Depending on the pay period you choose, you might face different challenges. OnTheClock simplifies this process by providing a user-friendly platform to set and manage your pay period. With just a few clicks, you can select your preferred pay period type, enter the appropriate details, and save your settings. Whether you need to set up weekly, bi-weekly, semi-monthly, or monthly pay periods, OnTheClock streamlines the process, ensuring smooth payroll operations and content employees.

How to Set Your Pay Period in OnTheClock

How you set your pay period in OnTheClock will depend on which pay period you select. Here’s the nitty-gritty.

• Step 1: Log in as an administrator.
• Step 2: Navigate to “Time Clock Settings.”
• Step 3: Under “Basic Settings,” choose your pay period type.
• Step 4: Configure your pay period according to the instructions below.
• Step 5: When finished, click “Save Settings. “

Configuring Weekly and Bi-weekly Pay Periods

After selecting “Weekly” or “Bi-weekly” as your pay period type, enter your Pay Period Start Date.

Configuring Semi-monthly Pay Periods

After selecting “Semi-monthly” as your pay period type, enter the following information:

• First day of first pay period: The monthly recurring date for the first pay period of each month (i.e., 1)
• First day of second pay period: The monthly recurring date for the second pay period of each month (i.e., 15).
• Start day of workweek: The day of the week your workweek begins (i.e., Monday).

Configuring Monthly Pay Periods

After selecting “Monthly” as your pay period type, enter the following information:

• Day of month to start pay period: The monthly recurring date to begin the pay period each month (i.e., 1).
• Start day of workweek: The day of the week your workweek begins (i.e., Monday).