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How to Change Pay Periods

How often you pay your employees can be just as important as how much. Pay frequency is a sensitive issue for both employees and management. All companies need to find a pay frequency that works for them, which minimizes expense and abides by state law. Employees will rely on the payroll schedule you choose and build their monthly budget around it, so striking the right balance is key.

Changing your pay periods is not a decision to be taken lightly. If you’re sure it’s necessary, the least you can do is be fully informed about all the implications.

How Often Should You Pay Employees?

The term “pay period” refers to the frequency with which an employer

chooses to pay employees and contractors. Common pay periods include

weekly, bi-weekly, semi-monthly, and monthly, with the most common

frequencies being bi-weekly and semi-monthly.

Preferred pay periods vary from business to business, but are often

mandated by state law. Currently, six states (Alabama, Montana,

Nebraska, North Carolina, Pennsylvania, and South Carolina) do not

mandate specific pay schedule requirements. Whatever your state

requires, it is still important to weigh the advantages and

disadvantages of each pay frequency option.

Common Pay Period Frequencies

Let’s break down the most common pay frequencies.

  • Weekly
  • Payroll processed weekly results in 52 pay periods each year, and since

    most payroll providers charge per cycle, this is probably not the

    preferred choice for most companies. Employers also spend proportionally

    more time working on payroll in this scenario. This pay frequency is,

    however, one of the most attractive for employees, especially hourly

    employees. Many employees like weekly paychecks because it best meets

    their cash flow needs.

  • Bi-Weekly
  • In this schedule, payroll processing occurs every two weeks, resulting

    in 26 pay periods per calendar year. Paychecks are calculated based on

    the last two weeks of work, with a full two weeks being 80 hours. Taxes

    are computed on a bi-weekly basis based on two weeks of pay. This

    frequency is preferred for companies with both salaried and hourly

    employees because it is easier to process both groups at the same time

    with this schedule.

  • Semi-Monthly/Bi-Monthly
  • This schedule typically processes payroll on the 1st and 15th of the

    month or the 15th and the last day of the month. Many companies choose

    this option because there are only 24 pay cycles rather than the 26

    cycles on the bi-weekly schedule, so it can be less expensive for

    companies using a payroll provider who charges per payroll cycle. Check

    amounts in this schedule may vary because payroll may be processed on

    different days of the week, and pay periods have variable lengths

    because months have varying numbers of days. This pay frequency is

    typically used for salaried employees who receive a set amount of pay

    for each pay period. This frequency is not preferred for hourly

    employees because amounts are not fixed. To be considerate, many

    employers give employees a payroll calendar to help them keep track of

    their pay schedule.

  • Monthly
  • Monthly pay cycles are the least expensive to administer; however, most

    employees don’t like this schedule. For many, it can be difficult or

    impossible to budget a full month ahead of time. So, it is relatively

    rare to see this pay frequency, especially for hourly employees.

How to Change Pay Periods

If your organization is thinking of changing from one payroll schedule

to another, it is important to transition properly. Follow these six

steps to change seamlessly to a new schedule.

  1. Create a team that will guide the change.
  2. Having one team in charge will increase ease of implementation and will decrease potential

    for mistakes during the process.

  3. Do your legal homework.
  4. Charge one individual with the job of researching the legal ramifications surrounding the planned change in payroll frequency. Make sure your new schedule abides by state laws and confer with your company’s lawyer to discuss contractual issues regarding the change.

  5. Save the date.
  6. Set a date for the change and make a timeline. It

    is especially helpful to make the change occur as close to the end of a

    fiscal year or the end of a quarter as possible to decrease

    record-keeping problems.

  7. Communicate with employees.
  8. Inform your people of the change sooner rather than later. Advance notice will allow workers to plan accordingly for the change. Communication is especially critical if you plan to decrease the frequency of pay as this will impact employees’ monthly budgets.

  9. Educate your employees about the change.
  10. Hold a question-and-answer session with your employees about the transition. A session like this will allow employees to feel heard and informed, and helps prevent any confusion.

  11. Review contracts.
  12. Integrate planned changes into new contracts rather than rewriting all existing ones. Write the new pay schedule into contracts offered to new hires, gradually phasing out the old pay frequency and converting to your new schedule over time.

Pay frequency is an important strategic decision for management because

of its effect on legal compliance and costs, as well as its impact on

employees. No matter which pay schedule you choose, Paycor’s solutions

streamline payroll processes, saving you valuable time and allowing you

to spend more time on strategic decision-making.

Ready to take the next step?

Pay frequency is an important strategic decision for management because

of its effect on legal compliance and costs, as well as its impact on

employees. No matter which pay schedule you choose, Paycor’s solutions

streamline payroll processes, saving you valuable time and allowing you

to spend more time on strategic decision-making.

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