In payroll, it’s all about the dates. For employers, that means choosing a payroll schedule that will dictate how frequently you pay your employees. But while this might seems like a fairly straightforward task, knowing how to choose a payroll schedule that fits your company’s needs can be a bit more complicated.
To help you figure out how to choose a payroll schedule, we’ve broken things down into three simple steps.
Step 1: Know your options
Before you go ahead and choose a payroll schedule, it’s important to know the different options available to you. The four most common Canadian payroll schedules are:
Weekly - once a week
- 52 paycheques per year
- Best for hourly employees
Bi-Weekly - every two weeks
- 26 paycheques per year
- Best for hourly or salaried employees
Semi-Monthly - twice a month
- 24 paycheques per year
- Best for salaried employees
Monthly - once a month
- 12 paycheques per year
Although there are four payroll schedules to choose from, it's important to check the labor laws for your province before choosing a payroll schedule. In some cases, provincial laws specify how often employees should be paid, meaning certain payroll schedules may not be available to your company. For example, in Manitoba, “Employees must be paid at least twice a month, within 10 working days of the end of a pay period.” In this case, a monthly payroll schedule is not an option.
As a rule of thumb, remember that you can always pay more frequently, but not less.
Now to understand the difference between each of these payroll schedules, consider the chart below:
Step 2: Consider your business needs
Now that you have a better idea of the difference between each payroll schedule, it’s important to think about what is best for your business. More specifically, take the following factors into mind:
1. Employee Details
Payroll isn’t just an important decision for business owners, but also for employees. Payroll schedules dictate how often employees are paid and what is appropriate for their position or job title. You’ll also need to factor in whether your employees are paid hourly or if they are salaried.
2. Your Break-Even Point
In order to know when to hire and how much you can afford to pay each employee, you’ll need to know the break-even point for your business. Remember, when benefits are factored in, that employee making $15 per hour may actually have a much higher total cost.
Cashflow is an important factor when it comes to payroll because it can help you determine when is best to pay your employee. For instance, if you charge clients at the beginning of each month, it might make sense to run payroll right after that because you know you’ll have plenty of cash in the bank. Of course, clients don’t always pay on time, so it can be tricky to use cashflow as the main factor in deciding which payroll schedule to use.
As mentioned above, some provinces dictate how often employees need to be paid. Beyond that, you need to take into account things like overtime requirements, your monthly remittance period as assigned by the CRA, etc..
5. Your Payroll System
When considering your payroll schedule, it’s important to think about whether the service you use fits your needs. For example, if you have a lot of hourly employees and want to run weekly payrolls, you’ll have to take into account whether your provider charges per cycle or not.
Step 3: Choose your pay schedule and implement it
Having gone through all the options available, considered any provincial restrictions, and then taken your own business needs into account, you’ve probably figured out which pay schedule is best for you. Now it's time to actually implement that pay schedule. Luckily, if you use a payroll provider like Knit, this is the easiest part of the whole process.
When you use payroll software, you simply enter your employee information, pick your preferred schedule, and go. With Knit's payroll you benefit from:
● Unlimited pay runs, including off-cycle payroll
● Automated tax remittances to the CRA
● Direct deposits and paperless paystubs
● Meet federal, provincial, and local tax and compliance deadlines.
● Employees can easily access their paystubs and end-of-year documents.