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Pay Frequency Pros & Cons

Every business chooses how often they pay employees.  The best frequency will depend on your cash flow, employee expectations, and other factors specific to your business. In Nebraska, businesses can change their pay frequency as long as the employees receive a 30 day advance notice. Be sure to choose what is best for the long term success of your business!

Here is a list of pros & cons of the most common options:

Weekly: 

  • Pros
    1. Employees typically appreciate the high frequency of pay dates.
    2. For the business, cash flow is divided into smaller amounts every week rather than larger sums needed for other frequencies.
  • Cons
    1. Heavy administrative burden processing 52 times per year.
    2. Four times per year there will be five pay dates in a single month so cash flow is uneven.

Biweekly/Every two weeks:

  • Pros
    1. Consistent schedule is easy to follow using calendar dates for pay period start, pay period end, and pay date.
    2. Overtime is easy to monitor
  • Cons
    1. Twice per year there will be three pay dates in a single month. These months can put a stress on cash flow

Semi-Monthly/Twice per month:

  • Pros
    1. Payroll is consistent with only 2 pay dates in every month
    2. Easier to monitor monthly cash flow without major fluctuations
  • Cons
    1. Pay Periods contain 10, 11, or 12 days depending on total days in the month, weekends, and holidays
    2. The day of the week for pay date changes each processing
    3. Overtime may overflow from one pay period to the next depending on work week cutoff

Monthly:

  • Pros
    1. Administrators only process once per month
    2. Cash flow is relatively consistent
  • Cons
    1. Employees must wait a long time between pay dates. This may cause the need for payroll advances or loans which increases admin work
    2. Large lump sums of cash are necessary each processing

 

Have more Questions? Contact Ideal Payroll Service at 402-614-3028

 

This article was published by Ideal Payroll Service Founder and President Joe Sova. Joe is a local entrepreneur with a passion for business success. Ideal Payroll Service specializes in payroll services and human capital management software for local businesses.



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