Making Pay Periods/Date Work for You

Sep 12, 2018 1:15:35 PM

How frequently do I have to pay my employees?

Great, question! For payroll in South Dakota, employees must be paid at least every 30 days (other state rules may vary).  However, typical pay period / date frequencies used are as follows:

  • Weekly
  • Bi-weekly (every two weeks)
  • Semi-monthly (twice per month)
  • Monthly

You can change your pay periods and pay dates however you want.  However, if you change them too frequently, you substantially increase your chance of making mistakes, which could lead to cranky employees and trouble with Federal authorities (the wage and hour folks).

If you have any employees paid by the hour, we suggest bi-weekly pay periods to make any overtime calculations easier.  That and a great timekeeping application, of course. Generally though, overtime is any time worked in excess of 40 hours during a 168 hour period (7 days times 24 hours) and requires a minimum of 1.5 times the hourly rate paid on those hours over 40.  Using a semi-monthly pay period makes proper overtime calculations difficult and time consuming due to the inconsistent days in the pay period (14, 15, or 16 days).  But, our timekeeping system handles overtime calculations for semi-monthly and monthly pay periods very easily!

If all of your employees are paid via salary – a monthly pay period is ideal as you only process payroll 12 times per year versus 52, 26, or 24 (weekly, bi-weekly, semi-monthly).  As an employee I was paid monthly for some time. Once I got used to it, it was quite nice for personal financial management.

Next you need a consistent pay date.  We recommend one week of time between the end of the pay period and the pay day (e.g., pay period ends on a Saturday, pay day is the next Friday and say every other Friday from that point).  This gives you reasonable time to collect data for accurate pay. Plus, it assists your business’ cash flow. This gap in time to pay is common and usually well accepted by employees.

If you’re paying on a semi-monthly period, you could pay on the 7th and 22th of each month with “default” changes when the 5th and 20th falls on a weekend or holiday (e.g., the 5th is a Saturday, then pay date is Friday, the 5th is a Sunday, then pay day is a Monday).

Here’s the issue though, if you’re changing from paying your folks one day after the end of the pay period to 7 days after, that takes a little coaxing.  Sometimes, a ONE-TIME advance to employees that want a little extra cash to help bridge their personal cash flow gap is helpful and appreciated. Every time I’ve seen pay dates change, some employees will definitely push back, some may even try to tell you it’s illegal, etc…, to some it’s no big deal.  Rest assured within a pay period or two, maybe three, the change will be a distant memory and your business will likely run a little smoother.

Whatever pay period and pay date you choose – keep it simple for administrative, HR, and general business reasons.  Don’t allow your payroll to manage you, manage your payroll and make your life a little easier.

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Topics: Payroll

David Hanna

Written by David Hanna

David Hanna graduated with an undergraduate degree in Business Administration/Major in Accounting and his Masters in Business Administration from the University of South Dakota. He spent 10 years in public accounting as a CPA doing various income tax work and business valuations including related expert witness services in shareholder litigation. He spent 3 years as CEO of a hotel management company with over 350 employees. He has been the owner/managing member of Paystubz since 2007 – see more at www.paystubz.com – or call him at: 605-721-2480

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