Pay period definition
/What is a Pay Period?
A pay period is the stretch of time over which employee work hours are compiled for later inclusion in a paycheck. This is typically a standardized period, such as a weekly, biweekly, semi-monthly, or monthly period. When one pay period ends, this marks the beginning of the next pay period - there are no gaps between pay periods.
An employer can have different pay periods for different groups of employees. For example, hourly workers may have a weekly pay period, while salaried workers have a biweekly pay period. Some state governments regulate the frequency of pay periods, such as not allowing pay periods of more than one month.
Pay Period Best Practices
It is more efficient for an employer to avoid a weekly pay period, since this requires the preparation of 52 paychecks per year. Conversely, employees may object to a monthly pay period, since they are only paid 12 times per year. These conflicting pressures lead many employers to adopt a biweekly or semi-monthly pay period.
A biweekly pay period requires the employer to pay employees 26 times per year, while a semi-monthly pay period reduces the number of payments to 24 per year. An advantage of a bi-weekly pay period is that employees are always paid on the same day of the week (such as every other Friday). A bi-weekly period also results in three paychecks in two months out of the year, which may be seen as extra cash for those employees that budget their expenditures based on two paychecks per month. A semi-monthly pay period always results in two paychecks per month, which makes it somewhat easier for employees to budget their expenditures. The semi-monthly approach is also easier for the payroll staff, which only has to prepare two payrolls per month.
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Pay Period vs. Pay Date
The pay date is the day on which an employee is paid for hours worked in a pay period. The pay date is always later than the pay period, since it takes a few days for the payroll department to calculate the pay amounts owed to employees. Many state governments cap the interval between the end of a pay period and the related pay date, so that employers cannot hold onto employee pay for too long.
Terms Related to Pay Period
A pay period is also known as a payroll period or payroll frequency.