Whether you're looking for a new job or just landed one, you're probably interested in the pay rate the job offers. But it's also important to be aware of the pay period for your new job, which means the timeframe when you work to earn the wages that will be paid out on your paycheck.
The pay period determines how often you get paid. This can affect budgeting, benefit accrual, and inform income calculations, so it's important to understand how pay periods work when you start earning consistent paychecks.
How many pay periods are there in a year?
The number of pay periods in a year depends on your pay schedule as an employee.
The vast majority of employees have either 24 or 26 pay periods per year. If you're paid every two weeks ("biweekly"), you'll have 26. If you're paid twice per month ("semimonthly"), you'll have 24 pay periods in a year.
However, some employers pay monthly, for just 12 pay periods per year, while others pay weekly, for 52 pay periods per year.
Why do pay periods matter?
Pay periods are important for several reasons, especially when it comes to personal finance and financial planning.
Budgeting
Knowing when you'll be paid and what will be included in that paycheck is important for your budget.
For example, if you're paid only once per month, you need to stretch that paycheck to cover all your expenses for around 30 days. It can be hard for some people to see a lot of money in their account and resist spending it for weeks and weeks.
If you're paid every two weeks, on the other hand, you get less money on each paycheck, but it only has to last two weeks.
Some employee benefits, like paid time off (PTO), are calculated based on pay periods. A consistent pay period ensures that accrual rates (for example, earning four hours of PTO every pay period) and deductions are applied correctly and fairly across the workforce.
Calculating monthly or annual income
Knowing how much you make per month and per year is helpful for budgeting, but it's also important when you need to apply for a credit card, a loan, or even an apartment rental.
These applications typically consider your total monthly or annual income as part of the qualifying criteria. And your pay period affects these calculations.
For example, say you're paid $2,000 biweekly before taxes and deductions. How much do you make per month?
Some people try to multiply $2,000 by two for a total of $4,000. But this short-changes you because most months have slightly more than four weeks. The correct way to calculate your monthly income is to multiply $2,000 by 26 to get the annual figure of $52,000, then divide that by 12 to get the monthly figure of $4,333, less taxes, withholdings, and other deductions.
What are the most common payroll schedule types?
Here are the common payroll types, listed in order from the most pay periods per year to the fewest pay periods per year.
1. Weekly
On a weekly payroll schedule, employees are paid once a week. This results in 52 pay periods per year.
Example: You work 35 hours over a one-week period. These hours are paid out on the following Friday. The next week, you work 40 hours, which are paid out the following Friday. This cycle continues for 52 paychecks per year.
This is most commonly found in industries with lots of hourly workers, such as construction, retail, and food service, where it is important to match the hours worked during the period to the paycheck. However, processing payroll every single week requires a lot of administrative work, so many employers of hourly employees opt for the next option: biweekly.
2. Biweekly
On a biweekly payroll schedule, employees are paid every two weeks, like every other Friday, for example. This results in 26 pay periods per year.
Example: You work 35 hours one week and 40 hours the next. The 75 hours' wages are paid out on the following Friday. In the next pay period, you work 37 hours one week and 36 hours the next. The 73 hours' wages are paid out on the following Friday (two weeks after your last paycheck). This continues for 26 paychecks per year.
While this schedule will give you two paychecks per month most of the time, you'll get three paychecks two months out of the year, depending on how the pay days fall. For example, if you're paid every other Friday, and Friday falls on the 1st of the month, you'll get paid on the 1st, 15th, and 29th of that month.
This is one of the most popular payroll schedules in the U.S., balancing frequency with administrative processing requirements. Many hourly employees, including part-time employees, are paid biweekly, based on the hours they've worked during that pay period.
3. Semimonthly
On a semimonthly payroll schedule, employees are paid twice a month, usually on the 15th and again on the last day of the month. This results in 24 paychecks per year.
Example: You earn $60,000 per year, regardless of the specific hours worked, allowing your employer to simply divide your salary to calculate your consistent gross income. So, you earn $5,000 per month ($60,000 / 12 = $5,000), which means you get $2,500 on the 15th and $2,500 on the 30th (before taxes and withholdings).
This schedule is most common for employees who earn an annual salary instead of hourly wages. Semimonthly pay periods work well for salaried employees because it's easy for employers to divide annual salaries into monthly figures, then just divide that in half for each pay period. They don't need to worry about matching the pay to the hours worked during the pay period, like they do for hourly workers.
4. Monthly
On a monthly payroll schedule, employees are paid once a month, typically on a set date (like the last working day of the month, for example). This results in 12 paychecks per year.
Example: You earn $60,000 per year, which divides into $5,000 per month ($60,000 / 12 = $5,000). So you're paid $5,000 on the last day of each month (before taxes and withholdings).
Monthly employee pay schedules are less common in the U.S., but are popular in parts of Europe and Asia, particularly for salaried employees.
How do employers choose payroll frequency?
Employers set payroll schedules based on multiple factors, including:
- Administrative processing requirements. While a lot of payroll processing can be automated, human oversight is required to make sure the calculations are correct. Payroll for hourly workers typically requires more work because the hours are often inconsistent. More frequent processing is typically more expensive because it requires more frequent repetition of the payroll process.
- Calculation complexity. In addition to calculating hours and pay rates, employers typically need to factor in withholdings and benefits. Paying salaried employees semimonthly instead of biweekly can create financial calculations that fit more cleanly into monthly reports.
- Legal requirements. Labor laws and regulations may dictate how often employees need to be paid.
- Cash flow planning. To make sure the cash is available to cover payroll, employers have to work their payroll periods around their income and expense schedules.
What are payroll withholdings?
Payroll withholdings are amounts that your employer automatically holds back from your paycheck for taxes and other deductions before paying out your net (take-home) pay.
Payroll deductions typically include:
- Federal income tax
- State income tax (if applicable in your state)
- Social Security tax (6.2% from the employee, matched by the employer)
- Medicare tax (1.45% from the employee, also matched by the employer; single taxpayers pay an additional .09% on any earnings over $200,000)
- Health insurance premiums (if you're using your employer's health insurance plan)
- Retirement contributions (if you're participating in an employer-sponsored retirement plan like a 401(k))
- Any union dues (if you're part of a union)
- Any court-ordered deductions (like child support or wage garnishments, if applicable)
How to make pay period budgeting easier
Whether you're paid weekly, monthly, or anywhere in between, these tips can help make budgeting by pay period easier:
- Create a budget based on each paycheck. Instead of thinking monthly, break your budget into what you can spend or save per pay period. For example, if you're paid biweekly, plan your expenses in two-week chunks.
- Use automatic transfers. Set up automatic transfers to savings or bill payments on (or right after) payday. This helps you meet your financial goals without having to remember or manually manage every item.
- If you're paid biweekly, account for months with extra paychecks. You can plan your regular expenses based on two paychecks per month, then treat the third paycheck you get twice per year as bonus income for savings, debt payoff, or special expenses.
- Get a prepaid debit card1 to manage discretionary spending. Netspend® Prepaid Cards[JS1] allow you to load a set amount onto your card, then use the card to purchase things in-store and online. This is ideal for budget-conscious spenders because you can't spend more than the amount loaded onto the card. So you can load your "fun money" each pay period to the card to automatically stick to your budget.
Make the most of your pay periods
Pay periods do more than just determine when you get paid. They shape how you budget, how your benefits accrue, and even how you calculate your income.
Whether you're paid weekly, biweekly, semimonthly, or monthly, understanding your payroll schedule helps you plan more effectively, manage cash flow, and make smarter financial decisions.
By aligning your spending and saving strategies with your pay periods, you can better control your finances and the money you work hard to earn.
