Pay Period

What Is a Pay Period?

A pay period is a defined amount of time over which an employee is paid. This is a recurring amount of time and generally falls into one of these four time periods:

• Monthly
• Bi-monthly
• Weekly
• Bi-weekly

Pay period can also be referred to by several other terms, including payroll schedule, pay frequency, payroll frequency, and payroll period. There is no difference between any of these terms – they all mean the same thing.

There are additional requirements for employers in some states, but consistent pay periods have to be set by the employer as a general rule.

How Are Pay Periods Determined?

There is no hard and fast rule for what your business should determine is the best pay period for you and your employees. Here are a couple of questions you should be asking before setting your business’s pay period:

• Are you employees paid by the hour, or are they salaried?
• What type of business do you run?
• Who handles your payroll?
• What is your cash flow situation?

When setting up your business and deciding on your pay period, you should consult with your accountant as they can offer professional advice on what pay period would work best for you and your employees.

How Different Pay Periods Work

While monthly and weekly pay periods are relatively straightforward, there can be some confusion around bi-weekly and bi-monthly. From a payroll perspective, bi-weekly means that employees are paid every two weeks, and bi-monthly means they are paid twice a month.

This may seem like the same thing, but there are slight differences. With bi-monthly pay periods, employees receive exactly two payments each month – generally on the 15th and the last day of the month – for a total of 24 payments per year. Since the payments are usually determined by date, they can fall on any day of the week depending on the month.

Bi-weekly pay periods, on the other hand, usually designate specific days of the week as payment days – for example, every other Friday. Since there aren’t exactly four weeks in every month, bi-weekly pay periods mean that employees may sometimes receive three payments in a month. They usually receive a total of 26 payments per year.

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See our full list of over 50 Small Business Terms here. 

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