Running a Payroll: How Frequently You Should Pay Your Employees

How often should I pay my employees? It’s one of the very first questions you have to tackle when you start a business. And it’s undoubtedly an important one.

Think about it: Your employees work for the success of your business. They work hard. So, they deserve to be paid their salaries on time.

But what pay frequency (read: pay period) should you go with?

Picking up a payroll frequency

To decide on a payroll frequency for your small business, you must take these four factors into consideration:

  • Employees’ preference: Your employees have financial circumstances that you need to consider. For example, if you have workers on low wages, they’re unlikely to have a lot of savings in their account to conveniently meet their daily or weekly household and personal expenses. Therefore, waiting for two weeks (or perhaps even longer) for the payroll can be a problem for them. They’re likely to prefer being paid on a weekly basis to better cope with their financial circumstances.
  • Cashflow availability:On the other side of the equation is your business’s cash flow. You can’t just set up a payroll period based on your employees’ preference; your business must have sufficient cash flow to fit the pay period that you’re choosing. Ask yourself: When do you collect receipts from your customers? How often do you have cash available to spend during a month? Then decide accordingly.
  • Accounting costs and logistics: Payroll processing takes time, effort, and money. As such, you’d want the payroll to seamlessly fit into your busy schedule. You’d want to do it in a way so that it doesn’t put strain on the already limited resources your business possesses.
  • The law: Finally, many states have set up payroll processing laws that local businesses must comply with. For instance, in Arizona, employers are required by law to pay their employees on a semimonthly basis. In California and Michigan, payroll frequency varies by industry. So, always check your state laws before you settle on a pay period; maybe, your state has already done the work for you.

What other businesses are doing

When making any business decision, it’s always smart to find out what your competitors and businesses in other industries are doing, and then optimize your execution accordingly. Deciding on a pay frequency is no exception.

So, how often do other businesses in the U.S process their payroll?

According to the Bureau of Labor Statistics:

  • 4% of private businesses process their payroll on a weekly basis
  • 5% of private businesses process their payroll on a biweekly basis
  • 8% of private businesses process their payroll on a semimonthly basis
  • 3% of private businesses process their payroll on a monthly basis
 payroll frequency

So, what do you think? Which pay period would best suit your business and employees?

Can’t decide or need help with your payroll processing operations? Reach out; A&B Accounting and Business Solutions will be happy to assist you.

About A&B Accounting and Business Solutions

A&B Accounting and Business Solutions provides bookkeeping, accounting, business consultation, payroll solutions and tax related services to small and medium-sized businesses in Deerfield, FL. The company employs an experienced team of professionals to ensure delivery of high quality services to its clients. For more details, please call 954-596-9966, or email at inquiries@myabaccounting.com.

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