Q:

How do companies determine payroll dates?

A:

Quick Answer

Companies determine payroll dates based on costs, state laws, convenience for their employees and their own preferences. The most common payroll frequencies are monthly, semi-monthly or twice a month, biweekly and weekly. Most state laws dictate that companies can't pay less frequently than monthly.

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Full Answer

Each payroll frequency schedule comes with its own set of advantages and disadvantages. Weekly payroll is most common in trade industries such as construction and plumbing, because employees are usually hourly workers with irregular schedules. A weekly payroll schedule aligns better with this type of work schedule, as the check earned at the end of the week reflects the exact number of hours worked in that week. Weekly payroll processing is costly, however, because payroll vendors charge fees each time they run a payroll, and things can get complicated when overtime hours are put into play.

Semi-monthly and biweekly payroll may seem similar, but the differences are significant for companies. Accounting departments run reports on a monthly basis, so semi-monthly payroll that runs twice a month is easier for them to calculate. Benefits also are typically run on a monthly basis, and a semi-monthly schedule makes it simpler to calculate automatic deductions. A biweekly payroll schedule, in which employees are paid every other week, comes out to 26 payroll periods per year and requires more complicated calculations for deductions, taxes and other items.

A monthly payroll schedule is the simplest and least costly route for employers, but the least preferred for employees, as many people find it hard to manage being paid so infrequently.

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