4 Reasons Payday Frequency Matters

How frequently does your company pay employees? In the modern world of online payroll and outsourced payroll services, employers are no longer limited to weekly pay periods typified by handing employees paper checks. Now employers can choose from a variety of different payday schedules and multiple forms of making payment.

In terms of payday frequency, the options are generally as follows:

  • Weekly
  • Bi-weekly
  • Semi-monthly
  • Monthly.

BenefitMall, a Dallas-based payroll and benefits administration firm, is an example of one company that offers all the options. They say that a client’s choice is more important than many employers know. In fact, BenefitMall says that there are four reasons payday frequency matters:

1. State Laws Influence Frequency

Believe it or not, there are just three states that do not have any mandates for payday frequency: Alabama, Florida, and South Carolina. The remaining 47 along with the District of Columbia have laws in place dictating the minimum frequency for employee paydays.

For example, Arizona law requires employers to pay their workers a minimum of twice per month. Furthermore, paydays can be no more than 16 days apart. Regulations in Maine also require that periods between paydays be no greater than 16 days, though they do not necessarily mandate twice monthly payments.

New York is even more unusual. Laws in the Empire State require weekly pay for manual laborers unless said workers directly approve of a semi-monthly arrangement. Other workers not classified as manual laborers can be paid weekly, biweekly, or semi-monthly.

2. Cash Flow Concerns

The second reason boils down to the fact that running payroll affects cash flow. Businesses with receivables based on the typical 30-day model may find weekly payroll processing too taxing on cash flow. They may opt for biweekly or semi-monthly to make managing their cash easier.

3. Payroll Processing Costs

Yet another factor in determining payday frequency is the actual cost of running payroll. It stands to reason that weekly payroll processing would be more expensive than biweekly or semi-monthly, just because there is more labor involved. As such, a lot of employers opt for biweekly or semi-monthly pay frequency in order to save money.

BenefitMall says one exception to rule this is the construction industry. They say that construction payroll is more easily managed and processed on a weekly basis. To that end, BenefitMall offers a special online payroll solution for the construction industry.

4. Employee Needs

The fourth and final reason payday frequency matters is because employers have their own financial needs. Not every bill the average worker pays is due on the first of the month. Most of us have arranged our bills to be scattered throughout the month so as not to put too much pressure on any given paycheck. Employers have to take these kinds of things into consideration as well.

There is also the money management aspect to think about. There have been plenty of instances of employers opting for monthly pay days in states that allow it, only to switch to biweekly or semi-monthly because employers were having trouble budgeting their funds on a monthly basis.

New clients signing up with BenefitMall for the first time are asked about payday frequency. That is because payday frequency is important for legal compliance, cash flow management, reducing payroll costs, and meeting employee needs. Determining payday frequency is certainly not a decision that should be taken lightly. Employers need to look at all the factors involved, then make a decision that is in the best interests of everyone involved.

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