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What is a Pay Period?
A pay period is the recurring schedule in which the time employees have worked is recorded and paid for. At the end of a pay period, payroll should be submitted so that employees are paid on a regular basis.
Factors to Consider
- Time: Each pay period runs for different lengths of time. This means certain pay periods require you to run payroll more often. If you pay an accountant or payroll provider to process your payroll, it may be more time consuming and expensive to use one of the more frequent pay periods.
- Cash flow and logistics: If the business’s cash flow fluctuates greatly it is important to make sure you will have cash on hand to pay your employees, so payroll should fit your schedule. If certain days of the week are busier than others, choose a pay period that allows you to run payroll on the same day each pay period.
- Employee preference: More than ever employee preference is affecting business decisions. Typically, employees would like to be paid more often, especially hourly or low wage workers. Taking employee preference into account is a good way to build a positive relationship with your people.
Pay Period Types
Every company is in a different situation and has unique needs, so payroll schedules may vary from business to business. Here are four of the most common types of pay periods used and how they work.
Weekly
A weekly pay period means that payroll will occur once a week, on the same day of the week. Though payroll will take more time to run using this method, a weekly schedule is perfect for businesses whose employees need to be paid more often.
Bi-Weekly
Companies with a bi-weekly pay period will submit payroll every two weeks. This means that the specific date of that month that payroll occurs will vary from month to month.
The pay period can begin on any day of the week and continue for 14 days. This is convenient because pay day will fall on the same day of the week every pay period. However, logistically bi-weekly pay periods cause issues when tracking salaried employees or accrued time such as vacation, sick and paid time off. Since there are 14 days in a bi-weekly pay period and 365 days in a year that means there are 26.07 pay periods in a year. If an employee earns a set salary per year or is awarded a set amount of accrued time per year, dividing that amount up into 26.07 pay periods is challenging.
Semi-Monthly
Pay periods that are semi-monthly happen on the same two days of each month, usually once somewhere in the middle of the month and once at the end. It’s very similar to a bi-weekly schedule, but is more consistent in the days that pay can be expected.
This is convenient because businesses and employees usually structure their budgets on a monthly basis and payroll occurs twice a month. The biggest difficulty comes if you calculate weekly overtime because a semi-monthly pay period contains partial weeks.
Monthly
The monthly pay period is exactly what the name indicates, one month in length. Usually payroll day will happen either at the end of the current month or the beginning of the next month.
Running payroll 12 times a year is literally half the workload of the next closest pay period type. While business owners may appreciate this, most employees prefer to be paid more than once a month. Some states also mandate a shorter pay period. In practice using a monthly pay period is uncommon among most businesses.
How Many Pay Periods Are in a Year
Most years have 52 weekly pay periods, 26 biweekly, 24 semi-monthly and 12 monthly. Some years have one extra payday: a weekly schedule can have 53 and a biweekly schedule can have 27. In 2027, January 1 and December 31 are both Fridays, so a Friday payroll can have 53 weekly or 27 biweekly paydays.
| Pay period | Pay periods in a year | Paychecks in a month | Hours per paycheck at 40 hours a week |
|---|---|---|---|
| Weekly | 52 (53 in some years) | 4, sometimes 5 | 40 |
| Biweekly | 26 (27 in some years) | 2, and 3 in two months of most years | 80 |
| Semi-monthly | 24 | 2 | About 86.67 on average, and it changes from period to period |
| Monthly | 12 | 1 | About 173.33 on average, and it changes from month to month |
Why Some Years Have 27 Biweekly Paydays
26 biweekly periods cover 364 days, and a year has 365 days, or 366 in a leap year. Each year your paydays land a day or two earlier on the calendar. Every 11 years or so, a 27th payday fits inside the year. In 2027, an employer who pays every other Friday starting January 1, 2027 has 27 paydays, and an employer who pays every Friday has 53.
Hourly employees are simply paid for the hours in each period. For salaried employees, decide before the year starts whether to spread the annual salary over 27 checks or pay the extra check on top, and put it in writing.
Biweekly vs Semi-Monthly Payroll
Biweekly payroll pays every other week on the same weekday, for 26 paychecks in most years. Semi-monthly payroll pays on two set dates each month, such as the 15th and the last day, for 24 paychecks. Biweekly periods hold two full workweeks, which keeps overtime simple. Semi-monthly dates line up with monthly bills and benefit deductions.
| Biweekly | Semi-monthly | |
|---|---|---|
| Pay dates | Every other week on the same weekday, such as every other Friday | Two set dates each month, such as the 15th and the last day |
| Paychecks a year | 26, or 27 in some years | 24 |
| Hours per paycheck for full-time hourly staff | 80, the same every time | About 72 to 96, depending on the weekdays in the period |
| Overtime | Each period holds exactly two workweeks, so overtime is easy to total | A period often ends partway through a workweek, so some overtime is figured in the next period |
| Payday on weekends | Always the same weekday | The date can fall on a weekend or holiday, so set a rule for moving it |
| Common fit | Hourly teams | Salaried teams and monthly benefit deductions |
Overtime is always figured by the workweek, never by the pay period. Federal law doesn’t let you average hours across two workweeks, so a 50-hour week followed by a 30-hour week still has 10 overtime hours. Our help article on weekly overtime with semi-monthly pay periods shows how TimeClick handles a workweek that crosses two pay periods.
“Bimonthly” can mean twice a month or every two months, so use “semi-monthly” or “every two weeks” in your pay policy. Also check your state’s rules before you switch schedules: state law sets how often you must pay, and many states don’t allow monthly pay for most hourly employees.
What Paid in Arrears Means
Paid in arrears means employees are paid for a pay period after it ends. For example, a biweekly period runs from Sunday to the second Saturday, and payday is the Friday after. The gap gives you time to collect time cards, approve hours and run payroll. Most hourly payroll in the US works this way.
The gap between the end of the period and payday is set by your schedule and state law. A shorter gap is easier when hours are totaled for you: timesheet reports from a time clock are ready when the period closes, and payroll integrations move the hours into your payroll software.
How to Keep Track of Your Pay Period Schedule and Employee Time Worked
The last thing you want as an administrator or payroll manager is to have employees all over your back about getting payroll submitted in time. That’s why it’s extremely important to keep a consistent schedule so your employees know when they can expect to be paid. Here are some common ways you can keep track of that schedule.
A Physical Calendar
If you’re a very small office with only a few employees, a physical calendar may work for you. Just buy a physical calendar or print one from the internet, mark your payroll days, and hang it in a highly visible area in your office. Now all your employees know exactly when payroll day is.
One restriction of a physical calendar is the ability to keep track of employee time. Not only is there more allowance for human error in calculating times, but there’s not as much room to manually record clock in and out times (unless you keep track of times on a separate sheet of paper).
Excel or an Online Spreadsheet
Spreadsheets are a great way to see lots of data in one place. You can create a spreadsheet with your pay schedule and have your employees enter their times manually into the spreadsheet each day. With spreadsheets, you can clean up the paper mess and move your time tracking to a more accessible location: a computer.
A downside of this is once again human error. It’s easy for an employee to round their time or possibly even lie about what time they came in or left. It also may be difficult to keep track of the times within a period if it’s not specified very clearly.
Time Clock Software
In my opinion, the best way to keep track of pay periods and employee time is a time clock software. You can enter your company’s decided payroll schedule and the software will automatically calculate what dates you should keep track of to run payroll. You also can automate your employee time calculations as they clock in and out. This greatly decreases the risk of buddy punching or forgetting when you need to run payroll.
Though time clock software usually costs money to get, it’s well worth the price. Time tracking software such as TimeClick makes running payroll reports simple, fast, and accurate. You can hold yourself and your employees accountable and make payroll day a breeze.
How to Change Your Pay Period Type in TimeClick
If you are a current TimeClick user, choosing and recording your payroll preferences is incredibly easy. Just follow these steps and you’ll be tracking the right pay schedule in no time.
- Open the TimeClick software and navigate to Administration Options.
- Click on the Preferences section in the Navigation bar.
- Select the Pay Period and OT tab.
- From there, you can choose your pay period type from the dropdown menu under “Pay Period Preferences.”
Within TimeClick, you also have the option to choose your report defaults to be either the last completed pay period or the current pay period.
Final Comments
If you are interested in a time clock software to keep track of your pay period and employee times, you can try TimeClick for 14-days, free! Feel free to call us at (435) 753-4102 ext. 1 or email sales@timeclick.com with any questions.