Pay periods determine how often you run payroll and how frequently your employees get paid. The balance lies in choosing a pay period that minimizes the cost of running payroll and abiding by state law, while simultaneously giving employees a pay schedule they can rely on. The most common pay periods are weekly, bi-weekly, semi-monthly, and monthly.
As businesses grow, there are a myriad of reasons to change their payroll frequencies. Regardless of the reason, there are a few things to consider before making the switch.
Check what is legal in your state
Before switching pay periods, double check with your state that it’s legal to switch to the frequency you want. According to the employment law handbook of Michigan, “An employer may pay employees one (1) time per month, two (2) times per month, every two (2) weeks, every week, or more frequently. An employer must designate regular paydays.”
Consider the impact on employee benefits and deductions
After you’ve determined your desired pay period is legal in your state, consider how it will impact employee benefits. For example, the change to plan remittance to carriers. This is especially true when switching from semi-monthly to bi-weekly. When you run bi-weekly payroll, there are two months of the year with three paychecks. Consequently, these additional days change deduction amounts. One of the popular options is to issue a block on the third paycheck from collecting health deductions. Regardless of the decision, benefits and other deductions will have to be considered because their amounts will change.
Another good example is the impact on frequency-based deductions such as child support payments or other court-issued garnishments. Be sure to review any garnishing paperwork before making the switch to a different pay period.
Inform your employees of the change
Tell your employees about the change. Shout it across the office floor, send an email, send another one, or post on your favorite internal channel. Regardless of how you choose to tell your employees, make sure they know about the change, preferably as early as possible.
Give your staff enough time to sort out their benefits, contributions, and personal budgets before the pay period change goes live.
Implement the pay period change
After you’ve checked with your state, informed your staff, and double-checked deductions and garnishments, implement the pay period change.
With some strategic planning and the right payroll software, there should be minimal disruption in your pay schedule. In fact, any payroll professional worth their salt would advise you to make the pay period change at the start of a new quarter or calendar year to make the switch as seamless as possible. At Dominion we specialize in accurate, timely payroll processing. Request a quote to see how our software can benefit your business!