Most pubs and bars pay on a four-weekly cycle. There are a few reasons for this:
- For forecasting of profits, as well as performance comparisons, it is often easier to work in four week cycles rather than the differing periods of calendar months (February 28 or 29 days March 31). However this does incur extra costs (stocktaking, payroll costs, time).
- Ability to be able to compare “like for like” periods of trading.
- The busy period at Christmas is counterbalanced by the quiet two weeks that follow in the 13th period giving a better comparison to previous years.
- The nature of pub staff is that the majority are “in between jobs” or it is their first job and need payment more frequently than per calendar month to be able to control their living costs.
- Greater control of payments to staff for the busy landlord.
- Ties in easier with the stocktake process.
There are several pay periods available and you can use any variation of those periods and any combination to suit your circumstances.
Here are the options for paying employees:
- Weekly, usually on the same day of the week. Many companies pay on Friday, for the previous week.
- Fortnightly; that is, every other week. Fortnightly paydays may be for the previous two weeks or the immediate two weeks. For example, you may pay on Friday, 14 September for the two weeks just ended, or for the two previous weeks (ending Friday, 31 August)
- Four weekly; this means that every four weeks payment is given usually in the week following the pay period for the preceding four weeks.
- Monthly, usually on the last day of the month or the first day of the following month but can be made on any day of the month. With RTI (Real Time Information) now in place for PAYE it is important to pinpoint the date of payment to avoid discrepancies in the tax and NIC payment cash flow (more about this in a further article)
How many payslips per year does each option mean?
- Employees paid weekly get 52 payslips per year.
- Employees paid fortnightly get 26 payslips per year.
- Employees paid four weekly get 13 payslips per year.
- Employees paid monthly get 12 payslips per year.
Does it cost more to pay more frequently?
Yes, there are costs associated with the processing of a payroll. If you are carrying out the payroll process yourself costs include:
- Printing payslips (unless provided digitally) and possibly writing cheques (bank charges) for employees.
- Bank Transfer costs, charged by banks
- And time spent by an employee or bookkeeper to calculate the gross pay, deductions, additions, court and maintenance payments, net pay, tax and NIC (National Insurance Contribution for both Employer and Employee). Also there are the various statutory payments such as SSP (statutory Sick Pay) and SMP (Statutory Maternity Pay)
- Time spent submitting and reconciling tax and NIC with the Inland Revenue dashboard along with dealing with HMRC queries.
If you use a payroll processing service, there is a cost for each payslip processed. So, whether you process your payroll within your company or use a payroll service, there is a higher cost of processing when you pay more frequently.
How do I determine how often to pay employees?
As noted above, salaried employees are usually paid monthly or four weekly. Hourly employees are often paid weekly or every other week (fortnightly). Within the pub industry, for all of the reasons given above, the norm is four weekly.
Employees like to get paid more frequently, but, as discussed, it is more costly to a business to pay for shorter periods, so you must balance these two conflicting sides and work out the best tactic for your own pub or bar.
David Williams is founder of payroll bureau The Wages Room