What Is a Pay Period & Types of Pay Periods

When it comes to deciding how often to pay the employees, companies have several choices in mind. The human resource professionals are mainly responsible for choosing the appropriate pay period. This decision has a huge impact on the entire organization. So, if you are in charge of selecting or changing the pay period, then it is important that you know each type of pay period and then make a well-informed business decision.

Here we are going to talk about what is a pay period and the different types of pay periods that are used by companies to pay their employees.

What is a pay period?

 A pay period is the length of time that the company follows to pay their employees. It reflects the number of times each year that an employee receives his salary. A pay period is different from a pay day which is the day on which the employee receives their salary. IT consulting companies in the USA choose different pay periods based on their exact business requirements.

Different types of pay period:

Here are some of the pay periods that most companies follow:

Weekly pay period

In the case of a weekly pay period, the employees receive their salary once every week on the same day. In this case, employees receive 52 paychecks every year. A lot of employees prefer this pay period because they get paid every week. However, companies need to devote more time and resources to this type of pay period because the payroll needs to be processed every week. The weekly pay period is an ideal choice for companies having a high number of employees working overtime or irregular hours. This makes it easy for the employees to record their hours. Calculating the payroll also becomes easy.

Bi-weekly pay period

A bi-weekly pay period means that the companies pay their employees every two weeks on the same day. In this case, the employees received 26 paychecks. However, in some years, they may get 27 paychecks as well. It is a very popular method of payment for employees because they receive consistent paychecks. This makes it easy for them to budget their expenses. This is an ideal pay period for employers that have a combination of hourly and salaried employees. It becomes easy to calculate the overtime for hourly employees. It is also less costly than the weekly pay period as the payroll process needs to be carried out every other week.

Semi-monthly pay period

In this case, the employers pay their employees twice a month on the same day. The employees get 24 paychecks per year in this type of pay period. Employees prefer this option because they know that they will receive their regular payments on the same two days of each month. It is also easier to manage the benefit deductions with this pay period. It is a good choice for employers who have salaried employees who work during the same schedule consistently.  Processing the payroll also becomes easy in this kind of pay period.

Monthly pay period

In monthly pay periods, companies pay their employees once every month on a particular date. In this case, employees receive 12 paychecks every year. This is the most common pay period for a majority of organizations. It is mainly adopted by companies having salaried employees. This is because the pay periods are consistent. It is also the least costly method of payroll management as it has the least number of pay periods. It is also quite easy for the employer to manage the deduction benefits. It also helps the accounting teams.

Quarterly pay period:

In the case of quarterly pay periods, the employees are paid every quarter that is once every three months on the same day. This equates to 4 pay periods in a particular year. This kind of pay period has multiple benefits including reduced administrative costs and workload for the employees. However, there are certain disadvantages involved as well. This includes limited cash flow for employees and issues with budgeting and financial planning. So, this kind of payroll schedule is opted for by small family-run companies and businesses with seasonal workers.

Conclusion:

And this is what pay periods are all about. So, before you choose the exact pay period for your employees, it is important that you do your research on each pay period type and then pick the right option for your startup. Also, if you are looking for the best payroll companies in USA that would take care of every aspect of payroll management on your behalf, then you may reach out 10bits. We will take your exact business needs into account and will offer you the best services on a budget. With 10bits by your side, you will also be able to ensure that your employees receive their payments accurately and on time.