How To Choose the Right Payroll Schedule for Your Business

Whether you’re outsourcing payroll or managing it yourself, it’s important to choose a payroll schedule that makes sense for your business and employees. The ideal payroll schedule will minimise your payroll costs, make administration as easy as possible, and result in consistent payslips for your employees.

There are four common payroll schedules to choose from in the UK: weekly, bi-weekly (fortnightly), semi-monthly, or monthly.

In this guide, we examine each type of payroll schedule to help you decide which is best for your business.

What Is a Payroll Schedule?

Your business’s payroll schedule describes how frequently you calculate pay for your employees and issue payslips. Your payroll schedule also determines how long your pay periods are—that is, how many working days are counted in each payslip.

To give an example, say you have a weekly payroll schedule. This means that you would calculate employees’ pay at the end of each seven-day period and issue a payslip for each period.

How To Choose the Best Payroll Schedule for Your Business

There are a few factors to consider when deciding which payroll schedule is right for your business.

Payroll Costs

Running payroll costs money. If you outsource your payroll to a payroll company, you’ll typically pay a subscription fee that includes a limited number of payroll runs per month. Every additional payroll run will cost extra. If you choose to manage payroll in-house with payroll software, then each payroll run will involve administrative and banking costs.

Therefore, it’s important to choose a payroll schedule that balances employees’ pay frequency, while minimising the administrative and financial burden of issuing payslips.

Hourly Employees

If your business has hourly employees, it’s important to choose a payroll schedule that doesn’t split up workweeks. Splitting workweeks can make it much harder to calculate pay and result in inconsistent payslips for your employees.

Employee Needs

It can be a good idea to ask your employees how frequently they prefer to be paid. Some highly compensated employees and independent contractors may have no issue being paid once a month. On the other hand, lower-compensated employees may need to be paid more frequently so they can pay their bills without worrying about pay dates.

Legal Requirements

The UK doesn’t mandate specific payroll schedules for businesses. However, if you have overseas employees, it’s important to think about whether any laws impact your payroll schedule.

For example, in the US, many states have laws governing how frequently you must pay employees. You can choose to use a more frequent payroll schedule than a state requires, but you can’t choose a less frequent schedule.

Multiple Payroll Schedules

It’s possible to run multiple payroll schedules within your business. For example, you could pay hourly employees on a weekly basis and salaried employees on a semi-monthly basis.

However, this isn’t recommended for most businesses. It can be confusing to manage and requires up to twice as many payroll runs, increasing your costs.

The Most Common Payroll Schedules

Let’s look at the four most common payroll schedules in the UK: weekly, bi-weekly (fortnightly), semi-monthly, and monthly.

Weekly Payroll Schedule

A weekly payroll schedule involves paying your employees once per week. Most businesses using a weekly payroll schedule set their pay periods from Monday to Sunday or Saturday to Friday. This approach results in your business issuing 52 payslips per year to each employee.

This type of payroll schedule works well for both hourly and salaried employees and if you pay overtime, it’s very easy to calculate. Plus, employees don’t have to worry about their personal cash flows since the next payday is never more than a week away.

However, running payroll weekly can result in high payroll costs. As a result, this type of schedule is best for businesses with a relatively high cash flow.

Bi-Weekly/Fortnightly Payroll Schedule

A bi-weekly or fortnightly payroll schedule involves paying your employees every fortnight. A typical bi-weekly pay period runs from Saturday to Friday of the following week, covering a total of 14 days.

With a bi-weekly payroll schedule, you’ll issue 26 payslips per year to each employee. In most months, you’ll issue two payslips, but there’ll be two months each year in which you need to issue a third.

The two months with extra paydays can be troublesome if you manage your own payroll. You need to make sure you meet your payroll tax requirements and adjust employees’ benefit payments accordingly. However, this won’t be an issue if you outsource payroll.

Many employees will be happy with the pay frequency of a bi-weekly payroll schedule. Pay periods cover entire weeks, so this schedule works well for both hourly and salaried employees.

Semi-Monthly Payroll Schedule

With a semi-monthly payroll schedule, you pay employees twice per month. Most businesses using this schedule pay on the 1st and 15th of each month, but you can choose different days according to what makes sense for your business.

A semi-monthly schedule results in 24 payslips per employee per year. It eliminates the two months with an extra payslip that occurs when paying bi-weekly, making a semi-monthly schedule easier and less costly to administer.

For salaried employees, the pay frequency won’t be significantly different from the pay frequency in a bi-weekly schedule. However, a semi-monthly payroll schedule may not work well if you have hourly employees, as each month your pay period will fall on different days—that is, a pay period could end on a Wednesday instead of a Friday.

This makes it much more difficult to calculate hourly employees’ pay if you pay overtime. Depending on an employee’s weekly schedule, splitting weeks can result in inconsistent pay amounts from one pay period to the next.

Monthly Payroll Schedule

With a monthly payroll schedule, you pay your employees once per month. A typical pay period runs from the first day of the month to the last day of the month, although you can also choose an alternative period such as the 15th-15th of each month.

This schedule will result in 12 payslips per employee per year. Since you’re issuing relatively few payslips per year, this payroll schedule has the lowest administrative costs. It’s also very easy to manage employee benefits when using a monthly payroll schedule.

However, a monthly payroll schedule can be problematic for low-salaried employees. Many employees can have trouble paying bills on time if they only have one payday per month. Your business may experience lower employee retention, especially among minimum wage or hourly employees when using this payroll schedule.

Highly compensated employees and independent contractors may be better able to adapt to a monthly payroll schedule. If you’re considering switching from a more frequent pay schedule to a monthly schedule, it’s important to talk to your employees first.