Setting up a payroll schedule can be tricky — and not just because small business owners aren’t HR professionals. There’s the challenge of balancing payroll frequency against your business income and cash flow needs. Plus, small businesses often employ hourly workers with inconsistent hours and wages, which makes payroll more complicated. And payroll doesn’t only affect business owners. Even one mistake could negatively impact the employee experience in a big way. That’s why we’ve put together this guide to payroll schedules. We’ve addressed all the most common questions and issues, including:
Included is a step-by-step guide on how to transition to a new payroll schedule once you’ve decided to make the switch. We’ve also explored why using Homebase to set up your payroll schedule could be a great option for your business.
Homebase makes payroll painless.
Onboard employees, track their time, and pay them — all in one place. What is a payroll schedule?A payroll schedule outlines when employees get paid. It includes a pay period and pay dates:
Employers can pay their employees on a weekly, biweekly, semimonthly, or monthly payroll schedule. Their choice will depend on cash flow needs, industry standards, payment structure (for example, hourly wages or salary), and local and state laws. Things to consider when choosing a payroll scheduleWhen choosing a payroll schedule, you should first take into account:
In addition, keep the following factors in mind: Your business’s cash flow cycleIf you’re a small business owner, there will be times in the month when you need more cash in the bank than others because you’ll need to pay monthly rent and stock up on inventory. This means you’ll have less money to spend on payroll at that particular time. Create a payroll schedule that coincides with when you’re more cash-flow positive. That way, you won’t have to pay employees late or worry about checks bouncing unexpectedly. Industry standardsFor example, if you own a small cafe, you probably pay your employees hourly, like many other businesses in the hospitality industry. And because people who employ hourly workers typically pay them weekly or biweekly, it’s best to follow that norm. Employees in this industry tend to have a greater need for weekly earnings. State pay frequency lawsMake sure you follow your state’s laws. Some states, like Arizona, for example, specify that you have to pay your employees at least twice a month and not more than 16 days apart. In fact, most states require employers to pay staff members at least once a month (to prevent overly infrequent payments). Homebase’s HR and compliance tool is designed to remind you about these regulations. You can even set it up to send automatic alerts for important dates so you don’t violate any laws. You’ll also want to make sure that you comply with federal laws and stick to rules about overtime and minimum wage requirements. Each payroll schedule, like weekly vs. monthly, may have different legal implications, so it’s important to do your homework before you make any changes. Research your state’s pay frequency laws to avoid violations. If you need help, Homebase also offers calls with HR experts who can help you audit your internal processes to ensure you’re doing everything right. Employee preferences and needsSome employees prefer to be paid more often than others, and certainly more than once a month. If that’s something you can manage as you balance your business’s needs, then consider giving out more frequent paychecks. You could try paying team members twice a month or even once a week, depending on employee preferences and whether they’re hourly or salaried. If you have a mix of hourly and salaried workers, a payroll app like Homebase can bring various pay arrangements into one view.
Source: https://app.joinhomebase.com/onboarding/sign-upCaption: Consider employee needs and your mix of hourly to salaried workers when deciding on a pay schedule.Whether you employ salaried or hourly workersWhen setting up your payroll schedule, consider whether your team is made up of salaried or hourly workers or a combination of both. Each type of worker may prefer a different system you may consider, state laws permitting. Hourly workers are more likely to prefer weekly or more frequent pay, while salaried workers tend to prefer once or twice a month. Using a system like Homebase makes it easy to set up payroll for both salaried and hourly workers. You can pay employees with different rates and agreements at the same time without having to do manual calculations for each separately. Time and resourcesConsider how often you’ll realistically be able to organize payroll. If you’re taking care of the payroll process on your own with a manual system, it may take you a few hours at a time. If you don’t feel you can commit to doing that once a week, you may decide it’s better to run payroll every two weeks instead. But using a tool like Homebase payroll can make paying employees much easier than doing it all by hand. You may find that you can run payroll more often as a result because it’s so much more straightforward than it used to be. What are the most common payroll schedules?The five most common payroll schedules in the US are:
Let’s get more specific about how each of them works and whether or not they’d be suitable for your business. 1. Weekly payrollSource: https://app.joinhomebase.com/onboarding/sign-upCaption: With a weekly system, you can choose the day you want to start payroll.A weekly payroll schedule means employees get paid on the same day every week, often on Fridays. That amounts to 52 payments per year:
Why it may work for you
Possible drawbacks
2. Biweekly payrollSource: https://app.joinhomebase.com/onboarding/sign-upCaption: With a biweekly system, you can set the date you want your next payroll period to begin and Homebase will calculate everything automatically.A biweekly pay schedule means team members get paid on the same day every other week, also often on Friday. That equals 26 payments a year:
Why it may work for you
Possible drawbacks
3. Semimonthly payrollSource: https://app.joinhomebase.com/onboarding/sign-upCaption: On the Homebase system, you can select the exact dates in the month when you want to run payroll.A semimonthly payment schedule means paying employees twice a month. However, unlike biweekly payroll schedules, employees receive their payments on fixed days:
Why it may work for you
Possible drawbacks
4. Monthly payrollSource: https://app.joinhomebase.com/onboarding/sign-upCaption: The Homebase platform makes it easy to select how often you want to run payroll and when with the dropdown menu.Monthly payroll is common for employers who hire freelancers and independent contractors that work on a project-by-project basis. It’s also typical for salaried employees and higher-level executives. With a monthly payroll schedule, employees are paid 12 times a year:
Why it may work for you
Possible drawbacks
If you’re only able to pay staff monthly, look into providing some other perks. This will help keep staff loyal and committed, even if they’re not getting paid every week. Consider offering gift cards, a relaxed shift-switching system, gifts for work anniversaries or birthdays, or even regular workplace coffee, pizza, or doughnuts to show your team you appreciate them. 5. Payroll in arrearsPayroll in arrears refers to a payroll schedule where employers run payroll for the previous week rather than the current one. It’s useful for business models that deal with fluctuations in pay and tips. It’s worth noting:
If you realize you need to rely on payroll in arrears, you should communicate this with your employees so they understand why you have to make it a regular practice and ensure they’re on board. Why it may work for you
This is even more so the case if you have tipped workers. You may not be able to run payroll until at least a few days after the pay period has ended because you need time to confirm and report employee tips, which aren’t recorded on timesheets. Possible drawbacks
How to transition to a new payroll scheduleSource: https://app.joinhomebase.com/onboarding/sign-upCaption: Homebase makes it easy to transition to a new payroll schedule.Whether you’re changing your payroll schedule or transitioning from a manual system to a digital one, Homebase makes it easy to switch:
Setting up your new payroll system beyond those steps: You need to communicate the payroll schedule change to employees as early and transparently as possible. It’ll be easier to make the shift if everyone is on board with the change, so choose a payroll schedule that will work for both your team and your business. Set the right payroll schedule for your business with HomebaseDeciding on a payroll schedule is a crucial decision to make as a small business owner because it doesn’t just affect you. It affects your employees too, so you need to get it right. But remember that what you decide doesn’t have to be permanent. You can always update your processes. And, as you grow, you’ll likely need to revamp your payroll schedule to save time and scale your business. That’s what makes Homebase payroll especially useful. Our powerful payroll features are designed for small business owners with hourly workers. They also work great for owners who are new to payroll. You can also integrate our payroll tools automatically with our other features for hiring and onboarding, time tracking and timesheets, and team communication. This saves even more time, avoids mistakes, ensures you stay compliant with your local tax and labor laws, and gives you access to a full suite of easy-to-use HR tools within a single digital platform.
Homebase makes payroll painless.
Onboard employees, track their time, and pay them — all in one place. The post Payroll schedule guide for hourly teams appeared first on Homebase. via Homebase https://joinhomebase.com/blog/best-payroll-schedule-hourly-workers/
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