How Often Should You Pay Employees?

There are multiple answers to how often you should pay employees. Employees like to be paid frequently, and your pay frequency impacts employee satisfaction. However, employers must consider several factors in determining the best pay frequency for their companies. The first place to start is with understanding the applicable laws in the states where your employees work. Then, you can consider additional payroll factors like cash flow, administrative issues, and employee preferences.  

Key Definitions

Pay frequency refers to how often employees receive paychecks and how often you run payroll. The four most common pay frequencies are weekly, biweekly, semi-monthly, and monthly. Choosing a pay frequency for your company depends on many factors, including state laws, employee classifications, collective bargaining agreements for unionized employees, and weighing the pros and cons based on your workforce and industry. 

Pay timing means the time that can elapse between when wages are earned and when they are paid. A pay period is the recurring, fixed length of time during which employees work and earn wages that are included in a paycheck. 

Common Pay Frequency Types

According to the U.S. Bureau of Labor Statistics, the most common pay frequency in the United States, which is used by 43% of establishments, is biweekly. Weekly pay is used by 27%, while semi-monthly pay is used by 19.8%. Monthly pay is the least frequent, with only 10.3% of establishments using it. 

Weekly

With weekly pay, there are 52 paychecks per year. Employees receive a paycheck every week, which is highly desirable to employees. However, weekly pay results in higher administrative costs for employers. Weekly pay is the most frequent in the construction industry (65.4%). 

Biweekly 

In biweekly pay, there are 26 paychecks per year. Employees get paid every two weeks on the same day. For companies with mostly hourly employees who are eligible for overtime pay, biweekly or weekly pay is a smart choice. It offers a good balance between frequent pay and managing costs. Biweekly pay is used the most in the education and health services industry (63.6%). 

Semi-monthly

In semi-monthly pay, there are 24 paychecks per year. Employees receive pay on two designated dates per month, but the day of the week varies. The time between paychecks varies, too. If the scheduled payday falls on a holiday or weekend, payroll must be processed earlier to ensure employees have their paychecks before banks close, which can result in administrative issues.

Semi-monthly pay works best for companies with mostly permanent, salaried employees. Since they are exempt from overtime pay, they receive the same amount in each paycheck. Semi-monthly pay is not recommended for hourly workers whose pay changes. The overtime calculations for hourly workers become more complex since pay periods often split weeks and have an inconsistent number of days. 

Monthly

With monthly pay, there are only 12 paychecks per year. This is desirable for employers for the lowest cost, but the least desirable for employees with the long gap between paychecks.  Monthly pay easily aligns with calculations for monthly benefit deductions. Monthly pay is most common for executives and salaried professionals with higher incomes that can stretch all month. It is not recommended for hourly employees who are living paycheck to paycheck. Managing a tight budget and limited cash flow can be difficult for employees who are paid monthly.

Factors To Consider in Choosing a Pay Frequency

There are many factors to consider in choosing a pay frequency. The most important factors are state laws, cash flow, and employee classification (hourly or salaried workers and exempt or nonexempt). Weigh the pros and cons of these items in making your decision:

• State laws: Start by understanding the pay frequency and pay timing laws in your state, as explained below. 

• Employee satisfaction: Faster pay frequencies are desirable for both employees and contractors. The greater access to cash flow helps them cope with the high costs of inflation.

• Cost: Some payroll services charge extra fees for each payroll run. The frequency also impacts your cash flow. Generally, higher pay frequencies result in higher costs.  

• Payroll administration: There are multiple factors to consider with how you plan to administer payroll, whether you run it manually or use an online payroll service, HR software, or outsource it to a Professional Employer Organization (PEO). 

• Labor: If you are running payroll internally, consider how many hours it will take your staff to administer a payroll cycle. Determine what frequency feels realistic without overwhelming your staff during each payroll run. 

• Employment classification: For nonexempt employees who are eligible for overtime pay and receive an hourly wage, a weekly or biweekly pay frequency is best. For exempt employees who receive a fixed salary every paycheck and are not eligible for overtime pay, semi-monthly or monthly pay are good options with lower administrative burdens. If your business has a combination of exempt and nonexempt employees, it may be an option to pay different groups at a different pay frequency as long as each has a consistent schedule. 

• Benefits: Depending on the pay frequency you choose, it will be easier or harder to calculate and apply monthly benefit deductions. 

• Cash flow: Ensure that the chosen pay frequency aligns with your cash flow and does not create unnecessary strain. 

After understanding the pay frequency minimum requirements in your state, what is the most important factor to consider next? “When you’re setting a pay frequency, start with your cash flow,” said Amy Coats, Founder of Accounting Atelier. “The right schedule is the one your business can comfortably sustain, and most small businesses end up landing on biweekly or semi-monthly because those work for the majority of cash flow patterns.” 

The Federal Law

Federal law does not mandate how frequently employees must be paid. The Fair Labor Standards Act (FLSA) does specify that employees should be paid on time with a consistent and frequent pay schedule. This means that employers should have pre-set paydays and not arbitrarily change them. It also requires compliance with correct employment classification for nonexempt employees, exempt employees, and independent contractors.

State Pay Frequency Requirements

Almost all states have pay frequency requirements, which specify the minimum frequency. This means you can pay employees more frequently than the state law requires, but not less frequently. Many states also have pay timing requirements. Failure to comply with state laws could result in fines or lawsuits. Employers who have employees who work in different states need to comply with the complexities of multi-state payroll laws.

The U.S. Department of Labor Wage and Hour Division provides a table showing the state payday requirements with footnotes for many states. The requirements range from weekly to once every 31 days (monthly). The three states without laws specifying pay frequency are Alabama, Florida, and South Carolina. Nebraska and North Carolina simply require setting a regular schedule for pay frequency, but they do not specify a frequency. In Montana, if the company does not establish a set pay frequency, it is presumed to be semi-monthly. 

Some states have different requirements for hourly and salaried workers, exempt or nonexempt employees, or for specific industries. For example, in Massachusetts, hourly employees must be paid either weekly or biweekly, but salaried employees may be paid semi-monthly or monthly if an employee agrees. New York specifies a weekly payday for manual workers that is no later than seven days after the wages were earned. New York also has detailed requirements for certain industries, including railroad workers, commission salespeople, and clerical workers.

In California and Michigan, the occupation determines the pay frequency. Certain states, including Rhode Island, allow employers to seek approval for other pay frequencies. Illinois, Nevada, New Mexico, and Virginia have monthly payday requirements for executive, administrative, and professional employees. States may have exemptions for executive, administrative, and professional employees as well as contractors. Some states require the interval between paydays to not exceed a certain number of days, such as 16 days in Maine or 31 days in Wisconsin. 

How To Change Your Pay Frequency

If you need to change your pay frequency, it should be a permanent change for a legitimate, proven business reason, not a temporary or arbitrary change. Any change must abide by state and federal laws. You cannot change to a frequency that is less than the minimum frequency mandated by state law. A change in pay frequency cannot be used to delay payments of wages or overtime pay or violate minimum wage laws. Even simply changing your pay date, but not frequency, requires caution, as certain states mandate the number of days between wages earned and payment. 

Some states require employers to submit a formal application to request a change to their pay frequency, including Connecticut, Rhode Island, and Hawaii. Most states have strict notification requirements to provide written notices to employees of the change in advance. Depending on the state, the wage notice requirements range from seven days to three pay periods in advance. You also need to comply with union bargaining agreements and work with union representatives. 

Changing pay periods is a complicated process that requires careful planning and effective strategies. You must determine in advance the best date to make the change with the least amount of disruption. Consider making the change at the beginning of the year or the beginning of a quarter. During the transition, you may need to run an extra payroll to ensure compliance with all laws, especially related to pay timing. 

“If you’re changing your pay frequency, the piece owners often miss is that the transition period itself can create a longer gap between paychecks for employees,” explained Coats. “I’d give employees 60 to 90 days of notice so they can plan for the new schedule, and explain why you’re making the change and how the new schedule will work.” 

Communicating Pay Frequency Changes to Employees

A change in pay frequency needs to be communicated to employees in advance through multiple internal communication channels. How far in advance you decide to communicate the change will depend largely on state laws as well as personal preference. Remember, employees depend on their pay date for managing their finances, so they need ample time to prepare and adjust for the change. Plus, you will need to update your information for new hires, including contracts and onboarding materials.

When developing your change communication plan, identify how you will explain the change and answer employee questions. Keep in mind that too much communication about the change is better than too little. Utilize a variety of internal communication channels to reach all types of employees, including in-person and virtual sessions, office signage, manager education, newsletters, emails, intranets, and messages on collaboration channels. Employees need to know how the change will impact each paycheck. 

All communication should be free of jargon and clearly define any pay terminology used. It is helpful to provide reminders, checklists, and calendars. A smooth transition means ensuring that employees know what they need to do in advance to prepare, especially for financial planning and managing their bill payments.