How many pay periods in a year? A guide for employers
Managing payroll is one of the most critical parts of running a successful business. It requires consistency, organization, and a clear understanding of pay periods. Accurate, prompt payments have a huge impact on employee satisfaction and help your company stay compliant with labor laws.
In this guide, we'll explore what a pay period is, the different types available, and how many pay periods occur annually for each type. We’ll also cover practical tips for selecting the best pay schedule for your company—and how you can use technology to make payroll processing more streamlined and efficient than ever before.
What is a pay period?
A pay period is a recurring time frame during which an employee's work hours are tracked to calculate their compensation.
It defines how often employees receive their paychecks. It also plays an important role in budgeting, tax calculations, and financial planning for both the employer and the employee. Understanding pay periods is fundamental to effective payroll management, since it helps with transparency, timeliness, and accuracy of payments.
What are the different types of pay periods?
Employers have several options when it comes to choosing a pay period, each with its own advantages and considerations. The most common types include:
Weekly pay
With a weekly pay period, employees are paid once every week, resulting in 52 pay periods in a standard year (occasionally 53, depending on the calendar).
This pay schedule is particularly prevalent in industries where employees are hourly wage earners, such as construction, retail, and hospitality. Weekly pay periods provide employees with a consistent and frequent income stream, which can improve morale and financial stability for those who rely on regular cash flow.
Biweekly pay
A biweekly pay period means employees are paid every two weeks, totaling 26 pay periods in a typical year (sometimes 27).
This is one of the most popular pay schedules across various industries. Biweekly pay periods offer a balance between administrative efficiency and regular paydays. They align well with a standard 40-hour workweek and simplify calculations for overtime pay.
Semi-monthly pay
In a semi-monthly pay period, employees are paid twice a month, usually on fixed dates like the 1st and 15th or the 15th and last day of the month. This results in 24 pay periods annually.
Semi-monthly schedules are common for salaried employees and align neatly with monthly financial obligations, like rent or mortgage payments. However, calculating overtime can be more complex on a semi-monthly pay schedule due to varying workweeks within the pay periods.
Monthly pay
In a monthly pay period, employees are paid once a month, leading to 12 pay periods per year.
While less common in the United States, this pay schedule is more prevalent internationally. Monthly pay periods reduce administrative tasks and payroll processing costs but require employees to manage their finances carefully due to the longer intervals between paychecks.
How many pay periods are in a year?
The number of pay periods—or how many paychecks in a year—depends on the pay schedule:
- How many weekly pay periods in a year?
- 52 (or sometimes 53) pay periods per year
- How many biweekly pay periods in a year?
- 26 (or sometimes 27) pay periods per year
- How many semi-monthly pay periods in a year?
- Always 24 pay periods per year
- How many monthly pay periods in a year?
- Always 12 pay periods per year
Why does the number of pay periods vary?
The variation in the number of pay periods, particularly for weekly and biweekly schedules, is because of the way the calendar aligns each year. A standard year consists of 52 weeks and one day (or two days in a leap year). Over time, these extra days accumulate, leading to an additional pay period in some years.
For example, in a year where January 1st falls on a Friday, and you have a biweekly pay schedule, you might end up with 27 pay periods instead of 26. This extra pay period can impact budgeting, payroll calculations, and tax withholdings, requiring employers to anticipate and plan accordingly.
How to choose the right type of pay period for your company
Selecting the right payment schedule and type of pay period for your company is a strategic decision that can affect cash flow, administrative workload, compliance, and employee satisfaction. Here’s what to do when choosing a pay schedule:
Consider the company’s cash flow
Your company's cash flow is a critical factor.
More frequent pay periods, like weekly or biweekly pay, require funds to be available more regularly. If your business experiences fluctuating revenue streams or operates on tight margins, running less frequent payroll, like semi-monthly or monthly pay, might be more manageable.
Assess your financial cycles to determine what type of pay period aligns best with your cash flow.
Keep in mind the administrative costs of payroll
Each payroll run incurs administrative costs, including staff time, processing fees, and potential errors that require correction. Having more frequent pay periods increases your business’ costs due to the higher number of payroll runs. By choosing a less frequent pay schedule, like monthly or semi-monthly pay, you can reduce administrative expenses and allocate your resources more efficiently.
Consider the size of the company and the number of employees
The complexity of payroll processing grows with the number of employees you have. Larger companies might benefit from semi-monthly or monthly pay periods to streamline operations and reduce administrative burdens.
On the other hand, smaller businesses, where payroll is less complex, might opt for biweekly or weekly pay schedules to help boost employee satisfaction without significantly increasing their administrative workload.
Streamline payroll management with Rippling
If you want payroll so powerful it runs itself, you want Rippling, a full-service payroll platform that can help you streamline and automate your payroll processing busy work—no matter what type of pay period you choose.
Rippling Payroll is intuitive, easy to use, and has a 100% error-free guarantee on every pay run. It also offers 500+ integrations, automatic and accurate tax registration and filing, and a dedicated mobile app where your employees can view their W-2s and paystubs, submit expenses directly, and more. With Rippling, you can:
- Pay employees and contractors in the same platform
- Manage time and attendance natively
- Run unlimited off-cycle pay runs at no extra cost
- Set up multiple pay schedules, pay rates, and pay types in just a few clicks
- Add recurring reimbursements (like cell phone payments, gym memberships, etc.) that are automatically paid out every pay period, monthly, or at whatever interval you choose
- Automatically calculate prorated pay runs for new or promoted employees
- Manage all currency conversions, including payroll adjustments
- Automatically calculate overtime for every country
- Make changes after submitting payroll
Frequently asked questions
What happens during a year with an extra pay period?
In years with an extra pay period—such as a 53rd weekly pay period or a 27th biweekly pay period—employers may need to adjust their payroll budgets accordingly. For salaried employees, you have two main options:
- Keep salaries the same: Continue paying the same salary per pay period, resulting in employees receiving an extra paycheck for the year. This approach increases your total payroll expenses for the year.
- Adjust per-paycheck amounts: Divide the annual salary by the increased number of pay periods, resulting in slightly smaller paychecks but keeping the total annual salary consistent.
It's important to communicate with your employees about how the extra pay period will be handled to manage expectations and avoid confusion.
Can I change the pay period frequency once it is set?
Yes, employers can change the pay period frequency, but it requires careful planning. You'll need to make sure your new schedule complies with any relevant labor laws, communicate the changes to employees, and adjust your payroll systems to accommodate the new payday calendar.
How does a pay period affect tax withholdings?
The length of the pay period influences the amount of tax withheld from each paycheck. Shorter pay periods typically result in smaller tax withholdings per check, while longer periods increase the withholding amount per paycheck. However, the total annual tax obligation remains the same.
This blog is based on information available to Rippling as of October 14, 2024.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
