Page 253 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
Frequency of Payment
The frequency of payment to employees covers two areas: the number of
days over which pay is accumulated before being paid out and the num-
ber of days subsequent to this period before payment is physically made.
Organizations with a large proportion of employees who are relatively

transient or who are at very low pay levels usually pay once a week, since
their staffs do not have sufficient funds to make it until the next pay peri-
od.If these businesses attempt to lengthen the pay period,they usually find
that they become a bank to their employees, constantly issuing advances.
Consequently, the effort required to issue and track advances offsets the
labor savings from calculating and issuing fewer payrolls per month.
The most common pay periods are either biweekly (once every two
weeks) or semimonthly (twice a month). The semimonthly approach
requires 24 payrolls per year, as opposed to the 26 that must be calculated

for biweekly payrolls, so there is not much labor difference between the
two time periods. However, it is much easier from an accounting per-
spective to use the semimonthly approach, because the information
recorded over two payrolls exactly corresponds to the monthly reporting
period, so there are fewer accruals to calculate. Offsetting this advantage
is the slight difference between the number of days covered by a semi-
monthly reporting period and the standard one-week time sheet report-

ing system. For example, a semimonthly payroll period covers 15 days,
whereas the standard seven-day time cards used by employees mean that
only 14 days of time card information is available to include in the pay-
roll.The usual result is that employees are paid for two weeks of work in
each semimonthly payroll, except for one payroll every three months, in
which a third week is also paid that catches up the timing difference
between the time card system and the payroll system.
A monthly pay period is the least common, since it is difficult for
low-pay workers to wait so long to be paid. However, it can be useful

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