Payroll Basics: What Is a Pay Cycle?

When starting a business, there comes the point when you need to begin hiring proper staff. But if you’ve never been a boss before, it can be challenging to know how to pay your employees in a professional manner.

However, once you know the fundamental principles of a pay cycle, you should feel ready and confident to pay your new staff members.

So whether you’re a business owner or starting out in HR, we’ll now run through some payroll basics. More specifically, let’s look at what a pay cycle is and an example of how one is set up.

What Is a Pay Cycle?

The intervals in which you pay employees are determined by pay cycles.

A pay cycle establishes the frequency with which businesses process payroll and the days they should pay employees. Employees are paid on the month’s final day, for example, if the pay cycle is monthly. On the other hand, a weekly pay cycle means that employees get paid on the Tuesday following the conclusion of the pay period.

Companies allocate payroll cycles into certain positions to help manage when employees in specific roles are paid. The payroll calculation frequencies, which establish the timeline for processing payroll items such as benefits or recurring earnings, are also allocated pay cycles.

You can construct pay periods for each cycle after you’ve created pay cycles. A default payment date is set for each pay cycle depending on the information you submit. Exceptions, such as a payment day that falls on a holiday, can be handled by changing the default payment date in a pay cycle.

How to Set Up a Pay Cycle

Determine how many different combinations of payroll cycle frequencies and pay dates your company has before setting up pay cycles. Each unique combination necessitates its own pay cycle. For example, your company’s pay cycle frequency and pay dates are as follows:

• Management – Paid on a bi-monthly basis on the 1st and 15th days of the month.
• Salaried workers – Paid on the last day of your pay period weekly.
• Hourly Workers – Paid on Fridays after the last day of your pay period.

So in this example, there are three different types of pay cycles running within the company.

In general, specific pay dates may apply to different groups of positions with the same pay cycle frequency. Both hourly and salaried employees, for example, are paid biweekly. You can employ the same pay cycle for hourly and salaried roles if you pay all positions on the Friday following the last working day of the pay month.

What if you have hourly positions paid on the Friday after the last working day of your payment period but salaried positions paid on the last working day of your payment period? Then, you can have a biweekly payment cycle for all your hourly employees and then a biweekly payment cycle for your salaried ones.

And, of course, you’ll need a paystub maker to pay your new employees. When you have an easy-to-use paystub maker, a changing payroll cycle shouldn’t cause you much bother. Instead, it should make the payroll cycle process straightforward and fast.

Establish Your Pay Cycle Process 

Whether you’re new to HR or setting up your own business, it is crucial to understand the pay cycle process. Now, you should have a much better grasp of how pay cycles work.

Thanks for reading, and good luck with setting up your pay cycles! Please check out some of our other informative articles on our blog.

Read Also:

• 4 Reasons You Should Outsource Payroll