How Often Should a Small Business Run Payroll?

Running payroll on a consistent schedule helps businesses pay employees on time, maintain accurate financial records, and stay organized for payroll tax reporting.

But how often should a small business actually run payroll? The answer depends on your employees, business needs, and applicable payroll requirements.

What Is a Payroll Schedule?

A payroll schedule determines how often employees are paid and when each pay period begins and ends.

Common payroll schedules include:

• Weekly — employees are paid once each week.

• Biweekly — employees are paid every two weeks.

• Semimonthly — employees are typically paid twice each month.

• Monthly — employees receive one paycheck each month.

Each approach affects payroll administration, cash flow, and the number of payroll runs your business needs to process during the year.

Biweekly Payroll

Biweekly payroll is a common option for many businesses.

Employees are typically paid every two weeks, resulting in 26 pay periods during most years. Because the payday occurs on the same day of the week, the schedule can be relatively straightforward for employees and employers to follow.

However, businesses should account for months that contain three payroll dates when planning cash flow.

Semimonthly Payroll

With semimonthly payroll, employees are generally paid twice per month, resulting in 24 pay periods each year.

For example, a business might establish paydays around the middle and end of each month.

This can work well for salaried employees, although payroll calculations may become more complicated when dealing with hourly workers and overtime.

Weekly Payroll

Weekly payroll provides employees with frequent payments but requires businesses to process payroll approximately 52 times per year.

This means more frequent payroll calculations, recordkeeping, and administration.

For businesses with hourly employees or industries where weekly pay is customary, however, it may be a practical option.

Which Payroll Schedule Is Best?

There isn't one payroll schedule that works for every small business.

When choosing a schedule, consider:

• Number and type of employees

• Salaried versus hourly workers

• Business cash flow

• Payroll processing workload

• Employee expectations

• Applicable federal and state requirements

Once a schedule is established, consistency becomes important for both employees and your financial records.

Payroll Frequency and Payroll Taxes

How often employees receive their paychecks and when a business must deposit or file payroll taxes are not necessarily the same thing.

Payroll tax deposit and filing requirements depend on applicable tax rules and the circumstances of the business. This is one reason business owners should maintain accurate payroll records throughout the year rather than treating payroll as simply issuing employee payments.

Keep Accurate Payroll Records

Every payroll run generates information that affects your business's accounting and tax records.

Maintaining organized records of wages, withholding, employer taxes, and other payroll activity can make quarterly and year-end reporting easier and help reduce errors.

It also makes preparing forms such as W-2s and applicable 1099s more manageable at year-end.

Build a Payroll Process That Works for Your Business

The right payroll frequency should balance employee needs, administrative efficiency, cash flow, and applicable requirements.

James Ridout CPA provides payroll processing, payroll tax filing, W-2 and 1099 reporting, and ongoing payroll support for small businesses.

Need help managing your business payroll? Schedule a consultation with our team.