How Often Should an Employer Pay Employees?
Options, Laws, and Costs
The frequency of paying employees must take into account federal and state laws, the cost of writing payroll, and the type of employees being paid. Federal and state laws require employees to be paid at regular intervals—you cannot pay them on a monthly basis one month and a weekly basis the next month.
The frequency of pay periods is not regulated by the IRS, but some states do impose requirements. Arizona and Maine, for example, require employees to be paid at least every 16 days while Minnesota requires transitory employees to be paid at least every 15 days.
Some states also require employers to pay terminated employees within a certain period.
Usual Pay Periods
The typical options for paying employees are weekly (usually on the same day of the week, often on Friday for the previous week), bi-weekly (or every other week, either for the previous two weeks or the two weeks before that), semi-monthly (or twice a month, usually on the first and 15th or the 15th and 30th of the month) and monthly (usually on the last day of the month or the first day of the following month).
Number of Paychecks a Year
- Employees paid weekly get 52 paychecks a year.
- Employees paid bi-weekly get 26 paychecks a year.
- Employees paid semi-monthly get 24 paychecks a year.
- Employees paid monthly get 12 paychecks a year.
Changing the Frequency
You can change the frequency of payments, but you can't do it arbitrarily or often. Usually, you can change the frequency if you have a legitimate reason, such as accounting software requirements or cost, and if you don't unreasonably delay payment.
Be careful not to lengthen the pay period to avoid paying overtime, however, as federal overtime regulations require overtime pay for over 40 hours in a work week.
Paying Employees at Different Times
You can pay salaried and hourly employees in different ways and at different times.
Salaried (exempt) employees are paid based on an annual salary, and do not receive overtime pay, so they are often paid the same amount on a monthly or semi-monthly basis. Since there is no reason to wait to see if overtime is due, they can be paid without delay.
For example, a salaried employee who has an annual pay of $36,000 can be paid:
- $3,000 a month
- $1,500 semi-monthly (twice a month)
- $1,386 every two weeks. Since this amount has been rounded up, the last paycheck of the year may be slightly different to account for this difference.
Costs of Paying More Frequently
Paying employees more often should not affect annual gross pay since salaried employees are paid based on an annual figure while hourly employees are paid based on hours worked during a pay period.
But there are costs associated with payroll processing: printing checks (payroll checks must include year-to-date pay information, so they must be special checks), direct deposit costs charged by banks, and time spent by an employee or bookkeeper to calculate gross pay, deductions, and net pay
If you use a payroll processing service, there is a cost for each check processed. But either way, processing paychecks more frequently will cost more, such as if you process paychecks every other week (26 times a year) rather than bi-monthly (24 times a year).