How to Determine Payroll Frequency
Decisions. Decisions. Decisions. As a small business owner, it seems that there are always decisions to be made, and you are the one expected to make them. Determining the frequency with which you will pay your employees is one decision that needs to be made fairly early in the life of your business. Chances are that if you have employees you’ve already made this decision. So how can you be sure that you have made the right choice?
As with many business decisions, a good place to start is by looking at the applicable state and federal law. In this case, there are not a lot of rules that must be followed. Federal and state laws do require that employees be paid on a regular basis. That means that you need to decide how often employees will be paid and then stick to it. A business is not allowed to deviate from its usual pattern to accommodate a seasonal slump or an unexpected expense. In addition, some states have laws setting a minimum frequency at which workers must be paid.
After considering the legal aspects of this decision, small business owners must also take into account the financial aspects. As you may have guessed, it is more expensive to pay employees more frequently. Every time payroll is processed, resources are expended. If a business is doing its own payroll operation, then there is the employee time that is used to calculate the payroll and deductions as well as the cost to print checks or have the pay direct-deposited. If the business relies on a payroll service, the cost will be based on the number of times the payroll must be done.
Finally, small business owners should consider their employees when making this decision. Typically salaried employees are paid either once per month or semi-monthly while hourly employees are often paid on a weekly or bi-weekly basis. In addition, employees might have a preference (usually to be paid more often) that employers may want to take into account if possible.
If you have questions about your own payroll operation and how frequently your employees should be paid, The Payroll Department can help you evaluate your situation and determine what is best for you. With years of experience in providing reliable payroll service, we are able to help you work these kinds of issues. Just give us a call at (317) 852-2568.
-Jessica of The Payroll Depart Blog Team