Choosing the appropriate pay frequency for your business

Choosing the appropriate pay frequency for your business

Deciding on the correct pay frequency to suit the needs of your business is something that can be quite challenging. There are various factors that must be considered such as accounting needs, HMRC deadlines and, most importantly, how it will affect your employees.

Like all decisions, it can be easier to come to a final conclusion once the pros and cons are weighed up.

Monthly pay

A monthly pay frequency is one of the most used types for a business and is often the most appealing since it aligns easily with Real Time Information (RTI) specifications and makes meeting HMRC deadlines more simplified. This method also makes keeping an audit trail for payroll entries and accounting procedures smoother and more easily retrievable due to less volume of entries compared with other pay frequencies - e.g., weekly. However, one of the major considerations to this route is the financial strain that may be placed on employees as a result of the gap between each payday. A more frequent pay could allow your employees to manage cashflow better or worse?

Four weekly pay

Four weekly payrolls encompass the same RTI simplicity and audit trail benefits that monthly payrolls possess, but with the added appeal of employees being paid more frequently. This does work more favourably for employees and creates higher morale for staff, but it does also affect other areas for certain staff members. One example being those who claim Universal Credit. These benefits are calculated on a person’s income each calendar month, which means when they are on a four weekly pay frequency, they lose a month of benefits due to having two sets of pay within one month.

Fortnightly or weekly pay

Unlike a monthly or four weekly payroll, a fortnightly or weekly pay frequency allows for straightforward calculations and provides a smooth pathway for employees to easily budget their money. Many retail businesses take on this option in order to reduce financial difficulties for their staff members, and generally appeals to a wider audience of individuals. These two pay frequencies are very attractive to businesses that have hourly paid workers where work schedules are inconsistent. In summary, a weekly and fortnightly payroll focuses quite heavily upon the needs of employees, but does it cater as well to the requirements of HMRC and other payroll demands?

RTI specifications and HMRC deadlines work well with a monthly payroll, which is a factor to consider when investigating what will work for your business. A more frequent payroll schedule means more frequent RTI submissions, which leads to greater amounts of HMRC deadlines to be followed. It’s also worth considering that a fortnightly or weekly payroll accumulates regular pension uploads, adding another commitment on a far more regular basis.

We are here to help

Weighing up all these options can be tricky. We can discuss the suitability of each option for your particular circumstances and help to provide the right information to ensure any decisions are well-informed.

If you’d like to discuss pay frequencies or have any questions in relation to this, please get in touch with your usual Azets advisor or a member of our specialist Payroll team.