Pay Cycles, and which one might be the right one for you

Almost all businesses start with a small team that expands with time, as the business does. Backend tasks that were easier to handle, end up getting more complicated unless a system is set in place. Setting up a clear payroll structure with paycheck stubs is one such process.

Although seemingly confusing at first, there are several ways like using a free pay stub generator, that can make a lot of things easier for you in the long run. Apart from of course simplifying logistics backend, the correct pay cycle and pay stub system helps build trust in the organization on the whole.

When employees are recognized for their performance, attendance, and commitment to the firm via rewards and deductions, each one feels a sense of accountability from within.Furthermore, maintaining records of number of days worked, overtime, sick leaves, and the relevant taxation structure applicable to you, helps save a load of time and effort at regular intervals.

So if you are someone who is just starting out, reworking your internal working methodologies, or figuring out how to generate paystubs for your employees, here are a few things you might want to get clarity on before moving ahead:

1. What pay cycle works best for companies that are the closest to you in terms of business domain, scale, and working methodology. Refer to what your competitors are doing whether for a pay stub example or in other areas – not only does it give you an existing case study to rely on, but maintains a sense of familiarity for those working in the industry.
2. Choose your medium of payments – whether these are going to be online or offline? Both come with their own set of processing costs – so try to work out what is best for you.
3. Whatever pay cycle you choose to go for, will your company be able to deliver it with ease? The worst thing would be to set up the system and all its components, only to find out that your current system does not allow its smooth execution.
4. If your business demands overtime, consider choosing a pay cycle that can accommodate the same as well. Whatever pay stub generator you choose to go for, ensure it can accommodate this as well.

Once you have the answers to all of the questions above, it is time to choose pay stub generators and a payment cycle that best suits your enterprise. Here are some of the most common options you can consider:

choose pay stub generators and a payment cycle

1. Weekly cycles-As the name suggests, this is where an employee gets paid every week. Normally this is a good option for those businesses where the duration for each job is relatively shorter. Most people from the construction industry choose this as a payment option because it is easier to put a time cap to the job. The only, and biggest, disadvantage of a cycle that is as short as week is that it needs to be done much more often than the other cycles – so you might need to allocate a fixed time to keep it systematic. Lastly, even if you are using a free paystub generator in this scenario, it is assumed that the company would have enough funds in their kitty to be able to make payments at such short intervals. If yours is one that needs to wait for a longer duration to receive payment, then this might not be the best option for you.

• Bi- weekly cycles- These pay cycles occur every 2 weeks, and is also carried out considering the engagement time between the payer and payee. As a system, irrespective of the check stubs you use, it is a less expensive option that does not take up as much time as a weekly cycle, and can also be considered a boon when the payroll is calculated on an hourly basis. The downside of this cycle is that it may, specially if not fixed, become a cumbersome task for accountants to work out the calculations for overtime work, penalties, or tax deductions for every individual.

• Semi- monthly– Very similar to the cycle above, an employee on a semi-monthly payroll gets paid for their work done between the 1^stand 15^th, and 16^thand 30^th/ 31^stof the month. The payment is made on two fixed dates, and this seems to be the most preferred option for accountants to keep their filing, pay stubs, and taxations systematically tidy.

• Monthly cycles- The most common cycle for employees’ paycheck in the world is the monthly cycle – generated at the end or beginning of every month of the year. While the employee may have to work a bit harder on budgeting, considering they have to live on the payment made for a month’s work until the next one comes along, it is the easiest system to manage due to the interval between payments made. This works best for salaried employees working on a long-term basis with your company, including the accountant himself/herself.

Now that you are aware of the most common pay cycles, it would be important to say that these are merely guidelines to the system. Not set in stone, you might have to work out a completely different option that suits your style of working the best. In either case, all we would recommend, is to ensure that you do have a strong pay stub creator and system in place only to make your life easier in the long run.