Paying your employees the correct frequency may seem simple, but many small business owners are doing it wrong. We commonly see errors with pay frequency, which can be very costly for a small business owner if they are caught out of compliance. Read this guide to learn the pros and cons of different payroll frequencies, along with the payroll frequencies each state requires, so you can make sure you’re staying compliant—without spending more than you have to.

Every state has different requirements for how hourly employees are paid, and it’s important to know the requirements for the states your company operates in. Click To Tweet

Pay Frequency: The Basics

Employers may pay their employees on a weekly, bi-weekly, semi-monthly, or monthly basis. The state in which the employer conducts business will usually establish the pay frequency for the employees based on the employee classification (exempt vs. non-exempt).

State law dictates the minimum frequency that employees must be paid; employers can always pay more often, but not less often than is required by the state.

Approved Payroll Frequencies

Weekly 52 times per year
Bi-weekly 26 times per year
Semi-monthly 24 times per year
Monthly 12 times per year

Weekly Payroll

Weekly payrolls are paid out each week on the same day of the week, for a total of 52 times per year. Pros and cons of weekly payroll include the following:

Pros:

  • Calculation of overtime is straightforward.
  • Employees are paid more frequently.
  • Employees receive their paycheck with consistent timing, which can make budgeting easier.

Cons:

  • Payroll is processed more frequently.
  • Monthly payroll costs will vary due to an additional payroll processed four times a year, which may cause additional steps for accounting.

Bi-Weekly Payroll

Bi-weekly payrolls are paid every other week on the same day of the week, for a total of 26 times per year. They are typically paid in arrears, which allows time for reporting of hours worked by hourly employees. Pros and cons of bi-weekly payroll include the following:

Pros:

  • Bi-weekly payrolls are an acceptable pay frequency for most states.
  • Calculation of weekly overtime is straightforward.
  • Employees receive their paycheck with consistent timing, which can make budgeting easier.

Cons:

  • Monthly payroll costs will vary due to an additional payroll processed twice a year, and may cause additional steps for accounting.

Semi-Monthly Payroll

Semi-monthly payrolls are paid twice per month, for a total of 24 times per year. The semi-monthly payroll is most commonly used to pay regular exempt employees. Pay dates for semi-monthly payrolls are typically the 15th of the month and the last working day of the month, but if the 15th falls on a weekend or holiday, the payday normally defaults to the last working day prior to the 15th. Semi-monthly payroll can also be called bi-monthly payroll; this is not to be confused with bi-weekly payroll (remember, the main difference in bi-weekly vs. semi-monthly payroll is being paid every other week vs. being paid twice per month). Pros and cons of semi-monthly payroll include the following:

Pros:

  • Monthly accounting is simplified, since there are always two pay periods per month.

Cons:

  • Many states don’t allow hourly employees to be paid semi-monthly, so you may be required to have multiple pay frequencies in order to pay hourly employees correctly.
  • If your state does allow hourly employees to be paid semi-monthly, calculation of weekly overtime may be tricky.
  • Employees may find budgeting more difficult, since the pay date varies based on the calendar and the length of the month.

Monthly Payroll

Monthly payrolls are paid out once per month, for a total of 12 times per year, typically on the same date each month (the last business day, for example). Pros and cons of monthly payroll include the following:

Pros:

  • Payroll is only processed once a month.

Cons:

  • Can cause a financial strain for employees.
  • Would need to establish another more frequent pay schedule for hourly employees.

It’s very important to be aware of payroll requirements in the states you operate in, and act according to those regulations. Different states have different requirements that must be followed. For example, the state of New Hampshire requires an employer to request permission from the New Hampshire Department of Labor to pay hourly employees on a bi-weekly basis; the form is available here.

Payroll Frequency By State

Every state has different requirements for how hourly employees are paid, and it’s important to know the requirements for the states your company operates in. Genesis helps you with that—we’ll identify these states when we’re setting up payroll to make sure you’re in compliance. This chart from the Wage and Hour Division of the Department of Labor identifies pay frequency requirements by state, but please note—there are at least 20 caveats to the chart (identified by asterisks and available on the DOL website).

Pay Requirements By State

This chart is geared toward hourly employees, where X denotes the minimum pay frequency for hourly employees. Employers can choose to pay more frequently if desired.

State Weekly Bi-weekly Semi-monthly Monthly
Alaska     X X
Arizona     X3  
Arkansas     X  
California X9 X9 X  
Colorado       X
Connecticut X4      
Delaware       X
District of Columbia     X  
Georgia     X  
Hawaii     X X5
Idaho       X
Illinois     X X2
Indiana   X X  
Iowa X X6 X X
Kansas       X
Kentucky     X  
Louisiana   X X7  
Maine     X8  
Maryland   X X  
Massachusetts X X    
Michigan 9 X X X X
Minnesota     X10 X10
Mississippi   X11 X11  
Missouri     X  
Montana12        
Nebraska 13        
Nevada     X X2
New Hampshire X      
New Jersey     X X21
New Mexico     X X2
New York X14   X14  
North Carolina 15        
North Dakota       X
Ohio     X  
Oklahoma     X  
Oregon       X
Pennsylvania 13        
Rhode Island X 16 X 16 X 16  
South Dakota       X
Tennessee     X  
Texas     X X17
Utah     X18 X18
Vermont X X19 X19  
Virginia   X 20 X20 X2
Washington       X
West Virginia     X  
Wisconsin       X
Wyoming     X  

Note: No regulations or not specified for Alabama and South Carolina.

Payroll Frequency In Massachusetts: An Example

As noted in the chart above, Massachusetts law requires employers to pay hourly non-exempt employees on a weekly or bi-weekly basis. Employers that wish to change from a weekly to bi-weekly pay period must provide employees with ninety days advance notice. Only exempt employees should be paid on a semi-monthly basis. However, there may be limited exceptions to this rule, such as employees of a hospital. You should always refer to the governing state law when making your decision. In Massachusetts, only exempt employees can elect, at their own option, to be paid on a monthly basis. If you have any questions, please refer to Section 148.

Although you may conduct business in a state that allows you to pay hourly non-exempt employees on a semi-monthly basis, such as Illinois, it can be an administrative nightmare trying to track overtime based on the FLSA rule of a 40 hour workweek. It is much easier—and you are less likely to incur any overtime violations during a wage and hour audit—if you pay your employees on a weekly or bi-weekly pay frequency.

FLSA & Hourly Employees

When establishing your pay period, it is important to consider the way overtime is calculated. Overtime is determined on a weekly basis, regardless of the length of the pay period. The Fair Labor Standards Act (FLSA) requires that non-exempt hourly employees, who are eligible for overtime (working more than 40 hours per week), receive compensation of 1.5 times their hourly rate.

Let us handle payroll—and HR, benefits administration, and more!

Do the people you’ve hired on staff to build and operate your organization actually add value to the payroll process, or are their skill sets being underutilized by processing payroll? The truth is, your employees are probably most valuable doing other work—which means it’s time to consider outsourcing your payroll to experts at Genesis HR.

We’re far more than just a payroll processing company; our PEO offers HR solutions for every need of your company, from performance management to HR policies and practices to compliance, benefits, 401(k) plans, and more!

When you’re ready to ensure your company has precise payroll and tax administration and your payroll taxes are deposited and filed accurately—all in a timely manner—a discovery call with Genesis is your first step. You can get started here.