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Which Pay Period is best for you?

“Anong petsa na? Oh, trese na pala, kinsenas na sa makalawa!

You may have heard this many times before, and maybe even uttered them yourself. Many, especially those on wages, may have experienced counting down the days to the next payday. After all, wherever you are in the world, payday is always a good day! Pay cycles and pay frequencies may affect how we manage our finances. However, the periods in which we receive our sahod may differ from person to person. To know more about the different pay periods, and tips on how to maximize and stretch our money before next pay day.

What is a pay period?

Simply put, a pay period is the amount of time you must render your service before getting paid. There are different types of pay periods all over the globe—this depends on numerous factors surrounding your employment. Your job nature, company customs, and country culture may heavily influence your specific pay period. There are five common types of pay periods that companies adopt, both locally and internationally.

What are the advantages/disadvantages of the different pay periods?

1. Daily

The daily pay period speaks for itself—work a shift and get paid on the same day after rendering the hours. In colloquial terms, this is what is called “arawan”.

Advantages: People who are struggling to make ends meet may find that being paid daily is advantageous because they may access their salary immediately after a day’s labor. A day’s earnings can then be utilized to purchase food and pay small bills right away.

Disadvantages: It is difficult to live paycheck to paycheck, and companies that tend to pay less usually stick to the daily paycheck schedule. As a result, this may lead to insufficient funds for future emergencies. If you do not work that day, as when you are off sick, likely you also do not get paid.

2. Weekly

To make overtime pay calculations and administration more time-efficient, organizations may prefer aligning a weekly pay period with the workweek. With that, employees are often paid on the same day each week, often a Friday, when creating weekly pay periods. Hourly workers in the construction sector and other skilled trade industries are in many cases paid weekly.

Advantages: Weekly pay periods provide the advantage of providing employees with a consistent cash flow, which promotes employee satisfaction and morale. Weekly pay intervals will also help individuals who frequently work overtime and whose work schedules shift from week to week.

Disadvantages: This type of pay period may be tedious and expensive. When a weekly system is implemented, there will be more pay periods and the administrators have to consider the processing costs. The pay day may also be disrupted if it falls on a holiday where people do not come in to work.

3. Bi-weekly (Fortnightly)

A bi-weekly pay period is a paycheck that occurs every two weeks (fortnight). This is common for other countries where the employer releases your paycheck every two weeks on a Friday or a Wednesday. Employees on fortnightly pay then receive pay 26 times a year.

Advantages: Employees and independent contractors benefit from the bi-weekly pay period since they get paid more regularly. The every two weeks check may be appealing to a lot of employees and may help them with their savings.

Disadvantages: The big disadvantage of a bi-weekly pay period will be carried by the employer. This is because paying employees every two weeks can dramatically increase the administrative costs. For the employee, it may be hard to manage paying of bills when the bills are on a monthly basis.

4. Semi-monthly

The semi-monthly pay is getting a payroll twice a month. Although this may be similar to a bi-weekly pay period, a semi-monthly pay totals to getting paid 24 times a year. This is colloquially referred to in the Philippines as a-kinse; a -trenta as they often fall on the 15th and 30th days of the month.

Advantages: A semi-monthly payroll does not follow the rigid structure of a weekly, bi-weekly, or even a monthly payroll. This is actually beneficial as the flexibility of this payment helps with the cash flow of the company.

Disadvantages: For some firms and employees, the lack of regularity with a semi-monthly payroll may be a dealbreaker. This is since payrolls may be processed on a different day of the week and employees will be left uncertain about when they will be paid.

5. Monthly

Getting a monthly salary simply means that the employee receives the payment on a specific date (nth day) per month.

Advantages: The monthly pay period comes with lesser time and has lower administrative costs for firms. There are fewer processing charges and the monthly payment has the fewest pay periods.

Disadvantages: The biggest downside to a monthly paycheck frequency is that it can be risky for those who struggle to budget their money effectively. In the instance that you go through your available cash before the end of the month, you will be forced to wait for your next salary release. Well, it's either that or you will be forced to rely on your interest-bearing credit cards or borrow cash from family, friends or money-lenders.

Which pay period is best for you and how can you get the most of your pay period?

Unfortunately, in the Philippines, employees are rarely given the liberty to choose their desired pay period but have to go with company standard pay cycles. With that, the best course of action is to spend your money wisely and stick to your budget. That way, you can save a part of your salary to help you in case of financial emergencies.

To make the most of your pay, write down all your expected bills and expenses and paydays in a month and prepare a cash-flow calendar. Allow for some savings and buffers for when pay gets delayed or for sick-days when you don’t get paid.

With a cash-flow calendar you get to see when your current income is not enough to cover the expenses and bills. It will allow you to rethink your budget and start exploring other sources of income (e.g. passive income) to cover the gaps.

Shari-Shari is not a financial adviser and nothing on this website is an offer to sell or a solicitation of an offer to buy securities, products or service. Any information presented in this blog are for general awareness purposes only with content derived from personal opinions and experiences of the bloggers as well as links to government or institutional websites. This blog aims to increase conversations about personal finance and do not constitute financial advice nor a specific recommendation to invest. Any brands, services, images, company stocks and ticker symbols that may appear on this website are incidental, are displayed for illustrative and informational purposes only.
Any historical returns, expected returns or projections are hypothetical in nature.

Shari-Shari is not liable for any loss or damage arising from the use of the information provided in this blog.


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