Payroll Schedules Explained: Types & Cutoff Dates for 2025

What Is a Payroll Schedule?

A payroll schedule is a recurring structure that determines how frequently employees are paid and how often payroll is processed. Payroll schedules are important for a company’s financial planning since it helps manage cash flow, maintain compliance with payroll laws, and ensure employees are paid timely.

Payroll schedule is made up of:

• Pay periods, which are the specific dates employees work that the paycheck covers.
• ‍Pay dates, which are the actual dates employees receive their money.

The Four Common Types of Payroll Schedules

There’s no one-size-fits-all approach to payroll schedules. Depending on the industry, the company size and the service offered, businesses can consider these four approaches for their payroll calendar:

Weekly Payroll

Weekly payroll is when employees are paid once a week, ideally on the same day. Generally companies pay their employees every Friday. This is common in industries such as construction, retail and hospitality that hire workers on an hourly basis, or to pay freelancers and contractors.

Weekly pay periods help improve employee’s work efficiency since they feel a sense of financial stability. However, it also comes with a higher processing fee, administrative costs and time commitment to do payroll journal entries 52 times a year.

Bi-weekly Payroll

Bi-weekly payroll involves paying employees every two weeks, usually on the same day. This results in 26 paychecks per year. This is one of the most popular schedules for small and medium-sized businesses and private companies. It can be used to pay salaried employees, hourly workers or part-time employees. 

bi-weekly payroll is commonly used since it strikes a good balance between convenience and cost-effectiveness. Employees still receive paychecks regularly, and businesses have fewer administration costs and can regulate employees with unusual work schedules. This can be challenging during months that include three payment periods, as it requires additional planning for HR to manage the pay cycle.

Semi-monthly Payroll

In a semi-monthly payroll schedule, employees are paid twice a month and on fixed dates. Usually the dates are the 1st and 15th or the 15th and last day of the month. This results in 24 pay periods annually.

This pay frequency is often used by larger companies with salaried employees. It’s predictable and aligns well with monthly accounting. However, this is not recommended to manage irregular work timings.

Semi-monthly payroll is sometimes confused with bi-weekly payroll. Read more about the differences here. 

Monthly Payroll

Monthly payroll is the least frequent schedule, where employees are paid once a month, generally at the end of the month. Monthly payroll is used for salaried employees or independent contractors with long-term contracts.

Monthly payroll reduces administrative effort to 12 monthly pay periods per year for the company but it can create financial strain for employees to wait for longer periods to receive their pay. 

How Do Payroll Cutoff Dates Work?

A cutoff date is the specific due date to finalize all transactions and calculations for a specific pay period. It’s the date when the HR team performs the final salary calculations, considering the hours worked, including overtime pay, leave and other pay adjustments such as bonuses or commission. Cutoff dates are important since they ensure accurate and timely payment.

For example, for a monthly payroll schedule, a company might set the 25th of each month as the cutoff date. This means that any work hours or adjustments reported after the 25th would be processed in the following month's payroll.

Factors to Consider When Choosing a Payroll Schedule

Managing payroll is a complicated matter, especially for multi-country teams. Companies have to overcome challenges that go beyond standard payroll processes given the issues of time zones, different local holidays and exchange rate fluctuations. Below are key nuances to consider when managing a global payroll system to ensure employees are paid on time.

1. Industry Standards: Look at what’s common in your industry and decide accordingly. For example, hourly workers often prefer weekly or bi-weekly pay, while salaried employees may be comfortable with semi-monthly or monthly schedules.
   
   
2. Employee Preferences: Offering a schedule that meets the employee’s financial needs helps improve their work efficiency and boost employee satisfaction.
   
   
3. Cash Flow Management: Choose a payroll calendar that aligns with your business’s cash flow. For instance, small businesses with inconsistent revenue might benefit from semi-monthly or monthly payroll to reduce payroll costs.
   
   
4. Regulatory Compliance: Different countries and states have specific rules about minimum pay frequencies – keep up with these changing regulations to avoid fines or legal issues.
   
   
5. Administrative Resources: Processing payroll can require extensive time and resources. Smaller businesses with limited HR support may benefit from less frequent schedules, like semi monthly or monthly payroll.
   
   
6. Global Teams: If your company operates in multiple countries, you’ll need to account for time zones, holidays, and varying legal requirements when setting payroll schedules.

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How to Run a 1st and 15th Payroll Cutoff

In the 1st and 15th payroll cutoff, employees are paid bi-monthly or twice a month – with pay periods running from the 1st to the 15th, and from the 16th to the last day of the month. The 1st and 15th payroll schedule is popular in corporate offices, and industries such as education, healthcare, and government, where salaried roles are more dominant.

Determine Payroll Periods

Payroll processing typically begins immediately after the cutoff, and employees are paid on or around the 15th for the first pay period and the last day of the month for the second period.

For example, in the month of April, the first pay period runs from the 1st to the 15th, covering 10 workdays, and employees are paid on the 15th. The second pay period runs from the 16th to the end of the month, covering 11 workdays, with payday on the 31st.

If an employee works 8 hours each day, the total hours worked would be 80 regular hours for the first pay period and 88 for the second pay period. The wage can be calculated accordingly.

Calculate Payroll Deadlines

Determine your payroll deadlines and cutoff dates, and make this policy clear to your employees, staff and any relevant external third-party payroll providers and partners.

For example, if the pay period ends on the 15th, the payroll cutoff can be set to the 12th or the 13th to allow time for data processing. Payments would then be scheduled for a few days after the cutoff date, planned carefully to account for weekends, holidays, and processing times.

Account For Overtime

One thing to keep in mind when running a 1st and 15th payroll schedule is handling overtime. Since the pay periods do not always align perfectly with the workweek, overtime hours worked must be calculated carefully.

If someone works overtime on the 14th or 15th of a month, it would be paid in the first period, but overtime worked on the 16th would roll into the second period.

Account for Weekends and Holidays

When a payday falls on a weekend or holiday, adjustments need to be made to ensure employees are paid on time. In such cases, businesses typically move the payday to the preceding business day to avoid delays in payment.  For instance, if the 15th falls on a Saturday, employees should receive their pay on Friday, the 14th. Similarly, if the last day of the month coincides with a public holiday, payroll processing should be completed early so employees are paid before the holiday.

The Role of Compliance in Payroll Scheduling

It is crucial for your pay schedule to comply with federal, state, and local labor laws. Governmental regulations often dictate laws regarding minimum pay frequencies, overtime rules, and tax deposit requirements.

For example, U.S. laws like the Fair Labor Standards Act (FLSA) set guidelines for calculating overtime based on the workweek, which may differ depending on the payroll cycle you use to run payroll. Companies can avoid costly penalties by reviewing and adhering to specific laws.

Key Takeaways

Running accurate payroll schedules are central to a functioning business and happier employees. Whether you operate on a weekly, bi-weekly, semi-monthly, or monthly payroll cycle, the key is finding a balance between administrative efficiency, employee satisfaction, and cash flow management.

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