One of the first decisions when a company decides to bring on employees is payroll frequency. This decision can impact a business in many ways, so finding the right payroll frequency for a company is crucial. The two most common types of payroll frequencies are weekly and bi-weekly. Both of these have their advantages and disadvantages.
Bi-weekly payroll runs every two weeks. It provides a cost saving option over weekly payroll because the payroll doesn’t have to be processed every week, which saves labor and supplies. Another advantage to bi-weekly payroll is that there is half the amount of records to keep versus weekly payroll. A disadvantage is that bi-weekly payroll is subject to a higher chance of miscalculation of overtime because hours are carried over to another week. Another major disadvantage is that employees who live paycheck to paycheck may be used to weekly budgeting, which can cause problems for the employee when receiving payroll every two weeks.
Weekly payroll is pretty self-explanatory, but it is often misunderstood as having to be a calendar week, meaning Sunday to Saturday. It’s actually a seven day period that is decided on by the employer when they begin payroll. One advantage to weekly payroll is employees get to reflect on the work they put in sooner than bi-weekly pay. Weekly payroll also better matches an employee’s cash flow needs. A disadvantage is that the weekly payroll frequency is more expensive than bi-weekly. This is due to additional labor and supplies to run the payrolls. Last, there’s also more of an administration burden for gathering hours and there are more records with weekly payrolls.