Everything To Know About Pay Cycle

A pay cycle is also called a pay schedule. It indicates how often the employer pays you for the work provided. The payment is linked to payroll and mentions the days when the employee received their monthly income. The pay cycle successfully incorporates two payroll elements called pay period and payday.

When businesses generate a paystub, they link the activity to their financial calendar to deliver timely compensation. The feature is also helpful for employers who can determine when the ranks are paid. In addition, they can decide on the payroll processing too.

Managing pay cycles ensure that employees stay motivated with regular compensation. Furthermore, the document also delivers information such as insurance, expenses, and taxes which they can study for their benefit.

 What are pay cycle types?

The employer can employ the following pay cycle types according to their company. There are no strict compliances that dictate payment timelines.

Daily

The most uncommon form of pay cycle involves issuing pay stubs at the end of working hours. This is because they are time-consuming and costly for small and large businesses. It results in shrinking financial stability. Consequently, the employees cannot recover their expenses because they must wait an entire day. The payroll is generated 365 daily for eight working hours.

Weekly

The following form of pay cycle is weekly. The employees are paid once a week at an aforementioned starting date. Freelancers, industries with irregular schedules, or hourly paid workers receive a paystub weekly. Furthermore, the feature is also easy for employers who offer overtime as it can be paid quickly.

Unfortunately, weekly paystubs require commitment which translates into cost, making it difficult for small businesses. A weekly paystub is generated 52 times a year on Friday for forty working hours plus overtime.

Bi-weekly

The most common type of pay cycle for businesses is biweekly. The employees are paid every two weeks. The paystubs are delivered on the agreed day of the week between the employee and the employer. Surprisingly, two months in a year will have three pay cycles which can complicate the accounting ledgers. Furthermore, the employer will also have to manage deductions such as taxes and health insurance in 26 pay cycles.

A bi-weekly paystub is generated 26 times a year at the week’s end for eighty working hours plus overtime.

Semi-Monthly

Semi-monthly and bi-weekly payments occur twice a month. As a result, employers sometimes use the terms interchangeably. Bi-weekly payments occur one week absent after the other. However, semi-monthly payments occur twice a month, usually on the first and 15^th. Regardless of the weeks of the month, the employee will receive payment twice a week. Bi-weekly paystubs are generated 24 times a year for 87 working hours.

Monthly

Another less common paystub is for monthly pay cycles. Companies prefer monthly paystubs because they are cost-efficient. In addition, it also makes it easier to manage insurance and deductions as they are also charged monthly.

The Bottom Line

If you wish to supervise a successful business, you must understand the elements of the pay cycles. After studying your cash reserves, vendor agreements, and income streams, choose which pay cycle to install. It will maintain employee motivation and job satisfaction.