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Tennessee to Allow Employers Monthly Payroll Frequency

Private employers in Tennessee now are permitted to pay wages once per month, under a measure passed by the state’s legislature on May 11. The bill was signed into law by Governor Bill Haslam and became effective immediately. Previously, employers were required to pay wages at least semimonthly, so the new law provides them added flexibility.

The ability to process payroll once per month could be an attractive option for Tennessee nonprofits seeking to lower costs and administrative burdens associated with payroll. Some other states, including Oklahoma, have provided nonprofits with flexibility to pay employees monthly. Generally, Oklahoma requires private employers to pay employees not less than twice per month, but the state grants an exception to private nonprofit foundations, allowing them to pay employees monthly.

Pay Frequency Considerations

The common pay frequencies used by employers are weekly, biweekly, semimonthly and monthly; employers should weigh a myriad of factors when deciding which to use. First, determining what frequency is allowed by state law is crucial. About half of states allow employers to pay wages once a month, while other states mandate that employees receive paychecks either semimonthly or more frequently.

Other factors for employers to consider in choosing pay frequency include:

  • nonexempt or exempt status of employees
  • costs of payroll processing
  • employee preference to be paid more frequently
  • administrative burdens for accounting and HR departments

Pros and Cons of Each Pay Frequency

Weekly: Every Friday (52 pay periods per year)

  • Employees generally prefer to be paid more often, so weekly paychecks provide the most frequent option.
  • Processing payroll 52 times per year will increase the costs and administrative burdens associated with payroll.
  • For employers with nonexempt employees, weekly payroll makes calculating overtime payments much simpler. Overtime should be calculated on a workweek basis.

Biweekly: Every other Friday (26 pay periods per year)

  • Similar to a weekly frequency, calculating overtime payments for nonexempt employees on a biweekly schedule is simpler, because the payroll frequency respects the workweek.
  • Although the costs are likely less than weekly payroll processing, increased administrative burdens still exist.
  • This option is attractive to employers with both hourly and salaried employees, because it’s easier to process both groups at the same time.

Semimonthly: Twice per month (24 pay periods per year)

  • Employees can be confused about when they are paid when the semimonthly pay dates fall on weekends. Plus, timesheet approval dates may be harder to predict. For example, approving timesheets on the 10th and 25th each month is not as easy to remember as every other Friday.
  • Calculating overtime on semimonthly paychecks sometimes can be confusing, because the pay frequency does not respect the start and end of the workweek.
  • Administrative burdens are lessened, because accounting departments usually appreciate when the end of the pay cycle coincides with the end of the month.

Monthly: Once per month (12 pay periods per year)

  • Overtime calculations can be difficult, as with semimonthly.
  • With 12 fewer payroll transactions than semimonthly, a monthly frequency is generally the cheapest option.
  • Cash flow for employees can be problematic because they have income only once per month. This also can be an issue for employers who prefer not to have a huge cash outflow once per month.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.