In payroll, it is all about the dates. For employers and HR, this means deciding on a payroll schedule to dictate how frequent to pay employees. Once a payroll schedule is decided, it becomes easier to set up a payroll calendar to facilitate timely salary disbursements.
Payroll schedules for businesses vary depending on a couple of factors – specific industry practices, job type, career level, employment type (contractor versus full-time employee) etc. For most businesses, the payroll schedule, in which salaries are disbursed to employees, will fall into either one of the four categories:
- Weekly – salaries are paid out once per week
- Biweekly – salaries are paid out once every other week
- Semimonthly – salaries are paid twice a month
- Monthly – salaries are paid once per month
Regardless of the payroll schedule, how should HR plan out the payroll schedule to ensure employees are paid on time? Here are some steps to creating a well-planned payroll calendar and sticking with it.
Decide on a payroll frequency
The first step in creating a payroll calendar is to decide on the payroll frequency. How often do you want to be paying your employees? The payroll frequency that you decide on often depends on the type of roles you hire in your organisation and also the industry that your organisation falls into.
Once you have decided on the payroll frequency, it becomes easier to decide on the start and end date of the pay period. One important thing to note is that payroll frequency norms may vary from country to country. For payroll professionals that have a regional payroll portfolio, it is important to ensure that payroll frequency comply with the local legislations before planning out the payroll calendar.
Account for public holidays
It is easy to plan out a payroll calendar – until a public holiday comes along and throws everything off. When planning out your payroll calendar, it is imperative to take into account public holidays, particularly if you are managing a regional payroll portfolio. Have on hand the list of public holiday dates for the year as you plan out your payroll calendar. This allows you to accurately plan your payroll calendar for months whereby payday falls on a public holiday.
Set up payroll reminders
With the numerous tasks that payroll department has to handle, it can be difficult to keep track of important payroll dates. Once you have established the annual payroll calendar, set up payroll reminders for important tasks such as payroll cut-off date, salary disbursement, and tax filing and reporting. It can be as simple as using Post-Its to remind yourself or staff, or perhaps setting calendar reminders on your email inbox. It is also helpful to share these important dates and reminders to employees to ensure that salary items, including claims submission or allowances, are captured in the upcoming payroll cycle.
Maximise the features of a payroll software
If you are finding it difficult to keep track of your important payroll dates, consider leveraging on your payroll software. Most payroll software today have in-built features that automatically tracks public holidays and monitors your payroll calendar. They not only act as your virtual assistant, but also help to get you into a routine in processing your payroll according to your payroll calendar.
Setting up a payroll calendar and sticking with it is a fairly simple affair. However, it is a collective effort from the entire payroll and HR team to adhere to the timelines in order to ensure that employees are paid on time.
What is the best payroll schedule
What is the best payroll schedule for your organisation? While this might seem to be a minor issue in the grand scheme of the payroll universe, the decision can have some very serious implications. If your employees are not paid on a regular basis, it can be difficult for them to confidently plan for the future. Yet, if you were to pay them too often, it could incur additional costs for the organisation and would prove difficult for your HR department to keep track as well.
While there might be a “common trend” of payroll schedule that most companies might be adopting, that does not necessarily mean that it might be suitable for your organisation. Remember, there is a never a one size fits all. Here are several different payroll schedule options that you can consider for your organisation.
If your employees work on an hourly basis, this payroll schedule would be a popular option. Such a payroll schedule is typically more prevalent in the trades industry such as construction, or in the food service industry. A weekly payroll would be better suited for an hourly employee’s cash flow needs. As the employee has an irregular working schedule and overtime pay has to be taken into consideration. However, one downside of such a payroll schedule is the cost. Payroll vendors typically charge each time a payroll is being run. Given that payroll is being run weekly, these costs could add up to a substantial amount. Additionally, more time and effort would be require when it comes to overtime pay calculation and salary disbursement to the employees.
A bi-weekly payroll would be run every two weeks. This payroll schedule would be the next best option for hourly employees who get paid overtime. This is because it is relatively easy to account for the number of overtime hours. A quick look at the calendar and you will realise that each month does not always have the full four weeks. Given that there are 52 weeks in a year, this would mean 26 pay periods. Hence there would be two months with a bonus pay period. Such a schedule might prove confusing for the HR and Finance department, increasing the likelihood of making payroll mistakes.
Do not mix semi-monthly payroll and bi-weekly payroll together. Based on a semi-monthly payroll schedule, employees are paid twice per month on the same calendar dates each month. Typically, companies either choose to pay on the 1st and 15th. Some may be on the 15th or last day of the month. Such a payroll schedule does not require the HR and finance department to run reports often. This minimizes the payroll cost. The pay period will typically coincide with the last day of the month. This makes it easier for the accounting department to close their accounts. However, one challenge of such a payroll schedule is that the dates of the pay period could fall on any given day of the week. Suppose the pay date falls on a Sunday, adjustments need to be made to ensure that employees are paid on the most recent weekday.
This type of payroll schedule is no doubt the least popular among employees out there. Why is that so? Essentially, employees have to go an entire month without a paycheck and some might struggle to manage their finances. However, this option is perhaps the most ideal and economical option to the organisation. Payroll costs are low as reports are being run once a month. Additionally, it is easier to keep track of employee benefits and attendance.
Selecting the best payroll schedule for your business ultimately depends on the nature of your business. It also depends on your internal accounting processes and procedures. However, always keep in check your employees’ needs in mind when considering your payroll schedule. After all, that is what counts the most.