Industry News

Which Payroll Frequency is the Most Effective?

(Article is based on information available at the time it was written: 2022-06-06)

The most common payroll frequencies include weekly, bi-weekly, semi-monthly and monthly. We will go into more detail for each and outline the pros and cons and why an employer might choose one type of frequency over another for their payroll process. 

Weekly
Payrolls that are processed weekly would have 52 or 53 pay periods in a year. Employees get a payment made each week which allows them to have funds on hand more often. Many individuals “live paycheque to paycheque” so weekly pay is appreciated by many employees. From the employer’s perspective, this is ideal if you have many employees that join and leave your organization (staffing agency, temporary work, on call etc.) as this provides the payment to new employees right away and concludes final payments to any employees who leave. The drawback to weekly payrolls includes processing time and fees. If the payroll runs from Sunday to Saturday, this leaves you with a few days at the beginning of the following week to collect and process the payroll data. Payroll companies typically charge per payroll run and weekly would be the most expensive compared to running the same payroll at a different frequency. 

Bi-weekly
This is similar to weekly but includes half the periods (26 or 27) in a year. Bi-weekly is the most common frequency used in Canada as it provides a middle ground between weekly and monthly. Employees get paid frequently and less payrolls are completed in the year. This frequency is ideal for both hourly and salaried employees because of the lead time available between the end of the pay period and the pay date. Using bi-weekly instead of weekly, employers could potentially save half their payroll processing fees. 

Semi-Monthly
This is in the middle ground alongside bi-weekly. This cycle is similar to bi-weekly but the pay period is always the same being split in two for a month, totalling 24 pay periods a year. The first half of the month and the second half are the most common semi-monthly payroll dates, with the pay dates being the 15th and end of the month. The main differences between semi-monthly and bi-weekly are the number of payrolls in the year and the lead time between the end of the payroll and the pay date. This makes semi-monthly more attractive to static payrolls such as those that have salaried employees but not as great if you have hourly employees. 

Monthly
This is the opposite to weekly. Employees don’t get paid as often and this may cause them issues as they need to budget for the entire month. This typically saves the employer the most in terms of payroll processing fees. It is ideal for salaried, not ideal for hourly employees. 

The consensus seems to be that the higher frequency payrolls tend to be preferred by employees and the lower frequency ones are preferred by the employer. Running payroll online allows a smoother operation regardless of frequency and the pay date itself make a difference as well but it ultimately depends on the goals and structure of the business as to which is most efficient. 

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