The Pros and Cons of Various Pay Frequencies
Deciding on the correct pay frequency to suit the needs of your business is something that can be quite challenging due to the various factors that must be considered such as accounting needs, HMRC deadlines and most importantly, how it will affect your employees!
Although the decision seems daunting, it can be easier to come to a final decision once the pros and cons are weighed up.
A monthly pay frequency is one of the most used types for a business and is often so appealing since it aligns easily with RTI specifications and makes meeting HMRC deadlines more simplified. This method makes keeping an audit trail for payroll entries and accounting proceedings much smoother and retrievable due to the smaller volume of entries compared with other frequencies e.g., a weekly basis. However, one of the major cons to this frequency is the financial strain that may be placed on employees due to the gap between each payday. A more frequent pay could allow for your employees to feel more secure in their finances and produce more happy staff!
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 received each calendar month, which means when a person who is on a 4 weekly pay frequency, they lose a month of benefits due to having two sets of pay within one month.
Unlike a monthly or four weekly payroll, a fortnightly or weekly pay frequency allows for straightforward calculations and provides an smooth pathway for employees to easily budget their money. Many retail business’ 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 business’ 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 to the demands of HMRC and other payroll demands?
As previously mentioned, 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 scale.
Weighing up all these options can be difficult on your own, but here at Garbutt and Elliott we strive to providing you with the information to make these decisions a lot easier! If you have any questions on any of the above or would like more information, get in touch with our friendly payroll team today on firstname.lastname@example.org