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Determining how and when employees will be paid is necessary. The good days after holidays are paydays; believe it or not, your employees do wait for the payday. No matter how goal-oriented and dedicated they are about their work, the reality is that they expect a reward for the hard work they put into the company.
Expecting compensation for hard work is fine; as such, setting up a payroll system at an early age is vital for employees and businesses.
Before choosing which pay cycle is best for you, let us understand what a pay cycle is.
What is a pay cycle?
A pay cycle is a term used to describe the frequency with which an employee is paid for their work. It is also known as the pay schedule. The pay cycle considers the period of time an employee worked, and the payday is the day when employees will be issued the payment. The pay cycle helps employees generate stubs using a check stub maker and ensures that they are paid for their work predictably.
Employers can consider different types of pay cycles and set the cycle themselves if not directed by law.
Daily
One of the least common pay cycles is daily, which is issued at the end of each workday. A daily pay cycle might be beneficial to an employee who is less financially established and may have to cover expenses. However, it might not be helpful to many businesses.
Weekly
As the name suggests, the weekly pay cycle pays employees at the close of every week. This cycle is less frequent than the daily cycle, and it may benefit hourly employees, employees with irregular schedules, or even freelancers.
Bi-weekly
A biweekly pay cycle means that employees are paid every two weeks. Paychecks are issued on a predetermined day of the week. As there are 52 weeks per year, and not every month has four weeks, two months will include a bonus pay period. This may be beneficial to employees, but it can be difficult for businesses as they have to deal with irregular bonuses, accounting, and reporting.
Semi-monthly
Although it sounds like a biweekly cycle, there is a difference between the two types. In semi-monthly cycles, instead of issuing paychecks every second week, employers issue paychecks twice every month, no matter how many full weeks there are in a month. The pay date may be the 1st and the 15th, or the 15th and the end of the month. This cycle is beneficial for salaried employees.
Monthly
Employees are paid at the end of every month in the monthly pay cycle. Most businesses or employers find this cycle cost-effective and energy-saving, with only 12 pay periods to be handled per year.
Choosing the right pay cycle
Pay cycles have a big impact on your business, significantly affecting employee satisfaction rates, recruitment, and retention. They also affect ongoing business expenses and overall net income. Here are some considerations you must make before choosing any cycle for the organization.
Payday laws
Most pay periods are determined by the area in which you do business. While some states have no specified pay period rules, others adhere to laws that dictate when an employee should be paid, what kind of employees have regulated paydays, and if there are any exemptions.
Employee type
As said previously, salaried employees benefit semi-monthly, while hourly employees prefer more regular paychecks. Before deciding the pay cycle for the organization, review the types of employees you have in your organization.
Costs
The various tasks and management roles associated with payroll have their costs. If the payment is frequent, the price may add up. When deciding the pay cycle, make sure you check your budget, as it may really hurt your business.
Cashflow
Another important factor to consider when deciding on a pay cycle is cash flow. With a weekly or daily cycle, you must fill out accounts, as you do not want to empty your account. You can select a payment schedule when you are sure that you have enough in your account and regular paydays will not affect the business.
Overtime
According to federal law, overtime must be calculated on a weekly basis, even if you are following a monthly, weekly, or bi-weekly cycle. Businesses that need to account for extensive overtime may be better suited with a weekly pay cycle. You can always choose
A free pay stub template is used to generate accurate stubs, including overtime pay.
The right pay cycle for you and your employees
In a nutshell, choose the pay cycle that best suits your business. Consider all the factors and then decide on the cycle. Also, make sure your employees are equally happy with the pay cycle, as it will motivate them and help them generate stubs easily using a free pay stub generator.
Related Article: Top Ways to Save Money in Small Business
FAQ's
What is a pay cycle?
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A pay cycle is when an employer issues employee paychecks, such as weekly, bi-weekly, or monthly. The pay cycle may vary depending on the employer's policies and the type of employee.
How do I know when I'll be paid during a pay cycle?
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Your employer should provide information on the pay cycle, including the pay period start and end dates and the pay date. This information may be included on your employment agreement or pay stub or communicated directly to you by your employer.
Can I change the pay cycle for my employees?
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Yes, employers can choose the best pay cycle for their business needs and employees. However, any changes to the pay cycle should be communicated clearly to employees in advance to avoid confusion or misunderstandings. It's also important to ensure that the new pay cycle complies with applicable labour laws and regulations.
