How Many Pay Periods in a Year

Determining how many pay periods in a year is based on the frequency and schedule an employer uses to run the company payroll and pay its employees. The pay period is the time in which an employee's work time is recorded and the employee is paid.

The most common pay periods are:

  • Weekly
  • Bi-Weekly
  • Semi-monthly
  • Monthly

What Is a Weekly Pay Period?

A weekly pay period is just that: an employee is paid each week. This payment method is used often for employees who work an hourly schedule.

  • In some situations, an employee is paid for the time worked for the week at the end of the week. In other situations, the employee is paid in arrears, which means an employee turning in his time sheet at the end of the work week will be paid for that week the following week.
  • An employee who is paid weekly will have 52 paychecks in a year. Weekly pay is a benefit to employees as it allows for easier and more efficient management of personal finances.
  • Weekly pay is the most common pay option, especially for trade industries.

For employers, a weekly payroll generates several problems.

  • If an employer is using a payroll service, weekly payroll is a costlier option and companies that provide payroll services tend to charge each time a company's weekly payroll is computed.
  • For employers who do their own in-house payroll, the weekly process is time-consuming and keeps payroll administrators in a position where other tasks may not be attended to on time.

What Is a Bi-Weekly Pay Period?

With a bi-weekly payroll system, employees are paid every other week resulting in 26 paychecks in a year.

  • Bi-weekly pay is usually scheduled on a specific day, every two weeks.
  • Employers benefit using a bi-weekly payroll system that is outsourced to a payroll service because the cost of computing and running the payroll is less expensive than hourly payroll.
  • In-house payroll administrators have more time for other work-related tasks when payroll is run bi-weekly.
  • This payroll system is the next most common payroll option.

What Is a Semi-Monthly Pay Period?

Semi-monthly pay generates payday every two weeks for a total of 24 paychecks in a year.

  • It is an easier system to run and makes management of personal finances easier.
  • Outsourcing the payroll to a vendor is less costly than hourly payroll.
  • With semi-monthly payroll, employees are paid twice a month, usually on the 1st and 15th or the 15th and the 30th or 31st.
  • Employees like semi-monthly due to knowing the exact date they will be paid.

What Is a Monthly Pay Period?

Using a monthly pay period system, employees are generally paid one time at the end of the month for a total of 12 paychecks in a year.

  • This method is most often used for salaried employees.
  • For payroll departments, monthly pay is less time-consuming and frees up payroll personnel for other work.
  • It is a faster method, has less chance of creating errors, and it's less costly.
  • Monthly pay periods are the least popular option as it makes planning personal finances more difficult.

What Are Pay Periods for Salaried Employees?

Salaried employees, unlike hourly employees, have their pay based on an annual amount. The annual amount is divided by the number of pay periods within the year. For example, a salaried employee making $36,000 per year would have that figure divided by 12 resulting in a monthly gross paycheck of $3,000.

How Are Hourly Wages Calculated?

To find the hourly rate of pay, the gross salary for a specific period, such as one week, is divided by the number of hours worked for that week. For example, the gross salary of an employee's paycheck is $600. The $600 is divided by 40 (the number of hours worked in that week) resulting in an hourly rate of pay of $15.00.

To find the hourly rate of a salaried employee, the gross salary on the pay stub is multiplied by the number of payments received in a year. This figure is then divided by 2,080. For example, an employee who is paid monthly has a gross salary of $3,000. The $3,000 is multiplied by 12 (the number of checks in a year) resulting in $36,000. This figure is then divided by 2,080 resulting in an hourly pay rate of $17.31.

How Do Leap Year Pay Periods Work?

Leap year pay affects salaried employees who receive pay on a bi-weekly basis. It may result in 27 pay periods versus 26 depending on the last pay period of the year. Pay is calculated by dividing the annual salary by 27.

Why Is a Pay Period Important to Employers?

Payroll processing is expensive. For employers to have set pay periods means better use of time management and personnel. An organized and efficient payroll system is beneficial to the overall running of the company by keeping controlled records for tax purposes.

Other benefits of having designated pay periods include:

Running payroll software and using an online payroll system, especially if payroll is being manually prepared, is a time-consuming task. All areas must be accounted for when calculating employee payrolls such as vacation and sick time, PTO, holiday pay, bonuses, and overtime.

For employers using the services of a payroll provider, the cost can be exorbitant as payroll services charge per transaction. Payrolls that are run weekly can become a significant expense. For this reason, employers prefer less frequent pay periods (bi-weekly, semi-weekly, monthly) to keep payroll costs lower.

As it now stands, employers tend to use the monthly and semi-monthly pay periods for salaried employees and prefer to use hourly and bi-weekly pay periods when calculating pay for hourly employees.

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