Payroll Calendars: The Small Business Owner’s Guide (2023) - Shopify (2024)

As your business grows, you’re going to need help—and once you add employees, you’ll need an organized system for paying them.

A payroll calendar can help you get (and stay) organized, provide transparency and predictability for your team, help manage cash flow, and make it easy to turn over payroll processing to an accountant or bookkeeper.

In this article, we’ll walk you through how to set up a payroll calendar and how to choose the payroll schedule that makes the most sense for your small business.

What is a payroll calendar?

A payroll calendar is a schedule for paying your employees. At a minimum, your payroll calendar will include pay periods and pay dates for the current year. Some payroll calendars also include information about pay frequency, timesheet deadlines, and payroll processing dates.

4 benefits of having a payroll calendar

1. Strategic cash-flow management
2. Organized internal systems
3. Improved employee relations
4. Compliance with state law

Payroll calendars can help business owners manage cash flow, organize and outsource bookkeeping and accounting, maintain positive relations with employees, and comply with state and federal law. Here’s an overview of the benefits:

1. Strategic cash-flow management. Unplanned expenses happen, but payroll shouldn’t be one of them. Setting up a payroll calendar lets you view and manage your pending liabilities and avoid surprises. It can also help you determine an optimal payment schedule based on your cash flow.
2. Organized internal systems. Keeping a payroll calendar can help you organize your internal accounting systems and avoid missed payments or errors. Payroll calendars also make it easier to outsource payroll tasks to an accountant or bookkeeper.
3. Improved employee relations. Your employees need to know when they’ll be paid. A late pay date or a miscommunication about pay schedule can erode the employer-employee relationship. A payroll calendar provides predictability and transparency and helps your employees plan their personal finances.
4. Compliance with state law. Many US states regulate employee pay frequency. Setting up a payroll calendar can help you comply.

Pros and cons of payroll calendars

Most business owners pay employees either weekly, biweekly, semimonthly, or monthly. Here’s an overview of the pros and cons of each:

Weekly payroll

If you follow a weekly payroll calendar, you’ll pay your employees on the same day each week, for a total of 52 pay periods a year.

• Pros of weekly payroll. This payroll calendar is optimal for businesses with hourly workers and fluctuating labor needs and income. If your employees log more hours when you are busy (and fewer when you aren’t), a weekly pay schedule can simplify employee timekeeping and align your payroll liabilities with your business income.
• Cons of weekly payroll. The more often you pay your employees, the more labor goes into the payroll process. If your business’s activity doesn’t fluctuate much, this schedule probably isn’t ideal.

Weekly payroll calendars are popular with restaurants and brick-and-mortar stores that are busier on nights or weekends. This pay schedule might also appeal to an ecommerce business owner who needs extra help around the holidays or other seasonal swings in activity.

Biweekly payroll

Similar to a weekly payroll calendar, a biweekly calendar pays employees on a specific day of the week. If you follow a biweekly calendar, you’ll run payroll every other week, or 26 times a year.

• Pros of biweekly payroll. This payroll calendar offers many of the benefits of a weekly schedule but halves the number of times you process payroll each year. Similar to a weekly schedule, a biweekly payroll calendar can align labor expenses with your business’s income. This system also accommodates hourly and salaried workers.
• Cons of biweekly payroll. Biweekly payroll calendars cause inconsistent monthly payroll liabilities. Twice a year, you’ll pay employees three times in the same month, which means your payroll expenses will be 50% higher in those months than in the other 10 (something that also happens with the weekly payroll calendar). If you don’t have the cash on hand to absorb this fluctuation, it may make sense to avoid a biweekly payroll calendar.

Many brick-and-mortar business owners have large recurring monthly expenses, such as rent and utilities. This can make it hard to absorb three payments to workers in a month while keeping up with other bills. Ecommerce business owners with limited monthly obligations, however, might consider this schedule.

Semimonthly payroll

Semimonthly payroll calendars are similar to biweekly calendars—but instead of paying your employees on the same weekday every other week, you’ll pay them on the same date twice a month. This translates to 24 paydays a year instead of 26.

• Pros of semimonthly payroll. A semimonthly payroll calendar provides consistency in your monthly payroll liabilities absent in a biweekly schedule. Because many bills are due monthly, this schedule can help with cash flow management.
• Cons of semimonthly payroll. Because they are based on a calendar date instead of weekdays, semimonthly payments won’t necessarily align with your employees’ work weeks. For this reason, it’s best to avoid a semimonthly schedule if you employ hourly workers.

A semimonthly payroll calendar can be a good choice for ecommerce business owners with salaried workers, providing your employees with frequent pay and giving your business predictable monthly expenses.

Monthly payroll

If you follow a monthly payroll calendar you’ll pay your employees 12 times a year, either on the predetermined calendar date, such as the last day of the month, or on a specific weekday, such as the third Friday of the month.

• Pros of monthly payroll. You’ll only run payroll 12 times a year with a monthly payroll calendar. If your employees are salaried, a monthly schedule gives you time to recover from temporary income fluctuations. For example, if you have a week of slow sales, you’ll have over three full weeks to make up the difference before payroll is due.
• Cons of monthly payroll. Some employees prefer more frequent pay, and some US states mandate a more frequent payroll schedule.

A monthly payroll calendar can be a good choice for ecommerce business owners who employ salaried workers in states that allow monthly payroll schedules.

How to create a payroll calendar

1. Choose a payroll schedule
2. Decide how you’ll run payroll
3. Determine pay dates, pay periods, and payroll processing dates
4. Account for holidays
5. Set reminders

Setting up a payroll calendar is simple, even if you’ve never done it before. Follow these steps to get started.

1. Choose a payroll schedule.

The most complicated part of setting up a payroll calendar is choosing a payroll schedule. Evaluate state laws, your employee types, and your cash flow cycle to select the right payroll calendar for your small business.

2. Decide how you’ll run payroll.

You must decide whether you’ll run payroll manually, with the help of a bookkeeper or accountant, or use payroll software.

• If you use an accountant or bookkeeper, provide them with your payroll schedule, employee information, and account information.
• If you use payroll software, you (or your accountant or bookkeeper) must input your selected pay schedule and accounting information into the software system. Make sure that projected pay dates are accurate, and turn on reminders to ensure that payroll is running smoothly.
• If you run payroll manually, proceed to step three.

3. Determine pay dates, pay periods, and payroll processing dates.

Go through the calendar for the current year and identify your pay dates and the corresponding pay periods. Then, work backward from pay dates to determine when you’ll need to run payroll to pay your employees.

4. Account for holidays

Don’t forget about holidays and weekends. If you pay based on calendar date, it’s only a matter of time before a payday falls on one of these.

If you pay your employees on a certain day of the week, you’ll need to keep an eye out for bank holidays. Pay special attention to Christmas, New Year's Day, the Fourth of July, Veterans Day, Juneteenth, and Indigenous People’s Day. These holidays fall on different days of the week each year and are recognized by the Federal Reserve, meaning that banks are closed, even if your business isn’t.

If your anticipated pay date falls on a weekend or holiday, enter your actual pay date as either the last business day before the closure or the day that banks reopen.

5. Set reminders.

Set payroll reminders in your calendar for the current year, including when you need to start the payroll process—not only the actual pay date. Don’t forget to also add an end-of-year note to set up next year’s reminders.

3 factors to consider when setting up a payroll calendar

To choose a schedule and set up a payroll calendar, take into account the following considerations:

• Employee types. Do you have hourly employees, salaried employees, or both? Wages for hourly workers vary, while pay for salaried employees is usually the same each pay period. Understanding which best fits your business can help you manage cash flow.
• Cash flow. Evaluate how and when your business makes money. Look at your annual cash flow cycle and identify periods where you might have difficulty meeting payroll, such as slow stretches and holidays.
• Payroll processing. Will you process payroll yourself, hire an accountant, or use payroll software? Running payroll on your own can save money, but it also means more work on your part, particularly if you’re on a calendar with many pay periods. Many bookkeepers and accountants charge extra for more frequent payroll processing.