What Are Pay Periods & How Are They Determined?

Cash withdrawn from a paycheck and bi-weekly pay period

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Understanding how to choose the best pay periods for your employees is important. This will determine how they manage their finances but it will always play a major role in how you handle your payroll.

What are Pay Periods?

A pay period is essentially the amount of time in between paychecks. As an employee, you work for a certain amount of hours per week, month, and year, and the pay period will determine what allotted amount of time determines your pay.

For example, if your employer runs on a semi monthly pay period, that would mean that you’re paid twice per month or bi-weekly. So, you would work two weeks and then be compensated for the two weeks of completed work.

You should remember that the workweek is different from the pay period. Every employer will have different rules as to how they handle this but the federally-mandated 168 hours during the week is fair game. The employer will then determine when that work week begins and ends. For many companies, it begins on Monday and ends on Friday with the weekend counting as overtime.

Types of Pay Periods

As mentioned, there are many types of pay periods and every employer will have different rules for how they comply with this. No matter what, you should be able to identify your pay period on your pay stub. If you do not receive a pay stub, you should be provided with a way to search this information online.

Daily

Some businesses of the modern world can actually pay you daily through instant pay or instant wage access. There are apps that allow employees to access their money as soon as they make it. This makes things easier for the payroll team and also allows employees to access their funds immediately which can improve morale.

The downside is that daily pay can be difficult to manage as both an employer and employee. We get used to receiving a large chunk of money all at once and dispersing it across a period of time to prevent us from spending it all at once. This can be more difficult when you always have small amounts of money available to you.

Weekly

Weekly pay is common in smaller businesses and construction trades. Most businesses will pay every Friday and this can make it easier to calculate overtime pay in jobs that offer a lot of it. The downside for the business is that processing payroll every week can be expensive and time consuming. There are also fees associated with third-party vendors so having a dedicated payroll and pay stub generator can help you.

Bi-Weekly/Bi-Monthly Pay

Roughly 43 percent of private businesses pay their employees bi-weekly and most businesses that use the other pay periods generally switch to this after a certain period of growth. This is especially true for larger businesses because it’s best for the employee and it leaves the least amount of red tape to cut through for the employer.

Bi-weekly pay is consistent, employees know what to expect, and it also makes it easier to calculate with holiday and sick pay. The bookkeeping process will certainly be a bit more daunting because you’ll need to keep accurate records but you won’t have to process payroll every week.

Monthly Pay

Paying once per month is one of the least common methods simply because of how complicated it is to administer to hourly employees. If most of your employees are salaried, it’s a bit easier because their pay remains the same but keeping track of an entire month’s hourly pay with vacations, sick time, and personal time is a tall order.

FAQs

Here are some of the most frequently asked questions about the types of pay periods.

How are Pay Periods Determined?

Pay periods are decided and determined by the employer. Do what you believe is best for the company, your employees, and the ones receiving the pay.

How many pay periods in a year?

The number of pay periods in a year is determined by the pay period you choose. For example, if you pay weekly you will have 52 pay cycles and if you pay bi-weekly you will have 26 pay cycles.

Final Thoughts

Keeping track of payroll and understanding how to choose the best pay period isn’t always easy. We believe it’s important to pay your employees in a way that benefits them because it will ultimately benefit you. Also, if you’re not currently providing pay stubs for your employees, check out our paystub generator and learn why pay stubs are important to your team.

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How Do You Get Started?

Our‌ ‌pay‌ ‌stub‌ ‌generator‌ ‌is‌ ‌easy‌ ‌to‌ ‌use:‌ ‌

1. Select‌ ‌from one of our four templates.
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3. Preview‌ ‌your‌ ‌pay‌ ‌stub,‌ ‌pay,‌ ‌and‌ ‌print.‌