Pay Period

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What is a “pay period”? 

A pay period refers to a specific, predetermined, and recurring length of time that an employee is paid by an employer. In a pay period, the number of hours that an employee spends on working is monitored and documented. This serves as the basis for wages.

A pay period is also commonly called a payroll period or payroll schedule. A company’s pay period structure provides employees a set schedule for receiving their paychecks so they can plan accordingly. There are several types of pay periods that companies can select. 

What are common examples of a pay period? 

An organization can choose the pay period that will best suit their company’s needs and the industry it belongs to. Each type of pay period has its advantages and disadvantages. The frequency of the pay period chosen will determine how many pay periods there will be in a year.

Here are the most common examples of pay period types: 

 

On the other hand, a bi-weekly schedule may get complex when pay periods extend beyond the end of the month or during leap years. During a leap year, companies may need to have a 27th pay period. Payroll teams have to adjust considering annual pay, employee contributions, and taxes. 

Each pay period structure has its benefits and drawbacks. It is up to the employer to decide which pay period will be most advantageous to the company and the employees. Generally, the fewer pay periods there are in a year, the less expensive it is for the employer. For employees, a weekly or bi-weekly pay period is deemed more helpful because there are more paychecks to receive. Budget-wise, it is easier to plan. Fortunately for employees, most employers use a weekly or bi-weekly pay period. 

I am an employer. Which pay period should I have in place? 

Before deciding the pay period that you will have, look at each type and try to understand its pros and cons. Next, determine your budget and employees. Do you have more hourly employees than salaried employees? What about your payroll service budget? Consider answering these questions before making a decision. Lastly, you can consult an accountant to help you determine what will work best for your business and employees. Remember, no cookie-cutter pay period works for all organizations.

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