What’s the Right Payroll Schedule for my Business?

Not all businesses in Hawaii are the same, so why should their payroll schedule be? As an employer, your payroll can be tailored to meet the needs of both your business and your employees.Nationally, 36.5% of payroll is processed bi-weekly, with a total of 19.8% of businesses choosing to pay their employees semi-monthly, and 11.3% of employers opting for monthly payroll.

Pros and cons of each type of payroll schedule

Here are a few things to keep in mind when determining the most efficient and reasonable way to schedule payroll for your business.

Weekly payroll is paid out every week on the same day of the week

Choosing to pay your employees weekly is the most cost-prohibitive payroll schedule for businesses—the more often you run payroll, the higher your associated payroll, postage, and banking fees. </p?

Statistically, the lowest-paying industries are often the most likely to pay their employees more frequently. On average, businesses that run payroll weekly have hourly earnings that average less than $20 an hour. Weekly pay is used frequently in the construction industry, particularly for projects covered by the Davis Bacon Act which regulates payment to all laborers and mechanics on Federal government construction projects.

Weekly pay is preferable for some hourly employees because it provides financial flexibility—an employee with irregular hours who works over forty hours in one week and limited hours the next, for example, benefits from receiving a paycheck as soon as hours are worked.

Bi-weekly payroll is paid out every other week on the same day of the week

Bi-weekly is the most frequent payroll schedule nationally. Nearly 36 percent of private businesses in the U.S. choose to pay their workers bi-weekly.

Paying your workers bi-weekly is administratively more cost-efficient than paying them weekly, and it is easier for your payroll team to calculate overtime for non-exempt employees than those that are paid semi-monthly.

Based on national BLS statistics, education, health services, leisure, and hospitality industries are most likely to pay their workers bi-weekly. Businesses that pay their workers bi-weekly also tend to pay workers more—an average of slightly over $25 an hour.

Semi-monthly payroll is paid out twice per month on specified dates

Semi-monthly payroll is processed twice a month, resulting in 24 pay periods. This payroll schedule is different from bi-weekly payroll, which results in 26 pay periods in the calendar year.

Accounting departments are most likely to favor semi-monthly payroll because it often coincides with month-end and year-end processing. However, semi-monthly payroll processing can be difficult for both your HR teams and employees.

Semi-monthly payroll can result in difficulty calculating overtime. Occasionally, overtime worked in the same calendar week can be spread out over two pay periods, since overtime is calculated on a per workweek basis. If your employees are hourly this can result in some confusion as to when they get paid and which hours are applied to each pay period.

Higher paying industries like the financial activities and information industries are most likely to prefer semi-monthly payroll. Companies opting to pay their workers semi-monthly are also statistically the highest paying—the average business paying its workers semimonthly pays nearly $30 an hour.

Monthly payroll is paid out on the same date each month

The least utilized payroll option nationally is also one that requires special consideration in the islands. In Hawaii, the minimum timeframe for which employees must be paid for work is semi-monthly. However, employees may opt to receive monthly paychecks via a special elections procedure.
Businesses opting to pay their employees monthly are among the highest paying with an average salary of $28.45 an hour.

As an employer, balancing the requirements of the law with the needs of both your business and employees takes careful consideration. Be sure any changes to your payroll scheduling, compensation, or benefits are coupled with sufficient communication. If you need more information on payroll, see our 5 ways to stop wasting time with payroll article.

This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.