The minute a small business hires its first employee above and beyond ownership is the minute ownership must start thinking about payroll. Who will process payroll? Will payroll be handled digitally or manually? How often will employees be paid?
The question of how often employees are paid falls under what we know in the industry as 'payroll schedule'. A payroll schedule determines how often payroll is processed and employees paid. There are numerous choices, so small business owners have to figure out what works best for them and their employees.
Choosing a payroll schedule is not as hard as it seems. Still, it is a major decision in as much as it affects a number of other business aspects, including cash flow. It behooves small business owners to give some careful consideration to payroll schedule well in advance of hiring that first employee.
The Four Options
The first step in choosing a payroll schedule is to understand the options. There are four that are legally allowed in the U.S.:
• Weekly – employees are paid on the same day every week.
• Biweekly – employees are paid every other week, on the same day.
• Semi-Monthly – employees are paid twice monthly, always on the same dates.
• Monthly – employees are paid on the same date, once per month.
Please note that monthly payroll is illegal in some states. There may be restrictions on semi-monthly payroll in other states as well.
Needs of Employees
The second step is to consider the needs of current or future employees. For example, a business that employs primarily low-wage, hourly workers should consider weekly payroll to make it easier for those employees to meet their own expenses. Low-wage earners face special budgeting challenges when they are forced to wait on a biweekly or semi-monthly payroll schedule.
On the other hand, a company employing primarily white-collar workers could save money on payroll processing without negatively impacting employees to a large degree. Such employers are better candidates for a semi-monthly or biweekly payroll schedule.
Frequency of Overtime Pay
Next up is to consider how often your company pays, or will pay, overtime compensation. Having a lot of overtime involved may suggest a weekly payroll schedule. Doing payroll on a weekly basis makes it a lot easier to keep track of overtime. It also makes overtime pay more easily understood by employees.
Total Payroll Budget
Last but not least is considering the company's payroll budget. Like everything else, ownership has to keep the costs of payroll in check so as to not allow it to affect other areas of the budget. This may be where a third-party payroll solution comes into play.
Outsourcing payroll to a company like ours saves money in the long run because companies do not have to employ their own full-time payroll staff. What's more, our technology-based solutions save money by being efficient and reliable. If budget is a concern, a company should look at biweekly or semi-monthly payroll along with outsourcing to a provider such as BenefitMall.
Please note that employees cannot be paid any less frequently than on a monthly basis, except in states where monthly payroll is illegal. In such cases, they can be paid no less frequently than semi-monthly. You can pay more frequently, but not less.
Remember, that moment you hire your first employee you have to start thinking about payroll schedule as well. BenefitMall is here to help. Whether you are just getting ready to hire for the first time or you have been managing payroll in-house for years, we have a solution for your company.