Chapter 3: Gross Earnings
3.3 Pay Periods and Pay Cycles
3.3.1 What are pay periods and pay cycles?
Pay periods and pay cycles are closely related, and the terms are sometimes used interchangeably. A pay period is the timeframe used to calculate wages, while a pay cycle is the recurring schedule on which employees are paid.
Pay periods are fixed and most often recur on a weekly, bi-weekly, semi-monthly, or monthly basis. For example, an employee paid bi-weekly will generally have 26 pay periods in one year, with each period covering 14 consecutive days. Payroll may number the pay periods for ease of reference (e.g., Pay Period 1 might be January 1–14). Because a calendar year does not divide evenly into 14-day cycles, there will occasionally be 27 bi-weekly pay periods, about once every 11 years. Similarly, employees paid on a weekly basis usually have 52 pay periods, but about once every 7 years there will be 53 weekly pay periods.
By contrast, a semi-monthly cycle pays employees twice per month (for example, on the 15th and the last day of the month), resulting in 24 pay periods each year. A monthly cycle pays employees once per month, for a total of 12 pay periods.
An employee’s pay statement, usually issued after the pay period has ended, will typically include the start and end dates of the pay period. Employers may choose the pay cycle that best suits their business needs, provided it complies with employment standards legislation in their jurisdiction.
3.3.1.1 Common Pay Cycles
The following are commonly used pay cycles in the Canadian workplace:
- Daily: In a daily pay cycle, the employer pays employees at the end of every day, amounting to approximately 260 paydays per year. This figure is arrived at by multiplying 5 working days per week by 52 weeks in a year; that is, 5 × 52 = 260. Note that a leap year has one additional payday, making 261 paydays in those years.
- Weekly: The employer pays employees every week in a weekly pay cycle. This results in 52 paydays because there are 52 weeks in a year.
- Biweekly: Employees get their earnings every 2 weeks in a biweekly pay cycle model, meaning there are 26 paydays in a year. This is achieved by dividing the number of weeks in a year (52) by 2; that is, 52 ÷ 2 = 26.
- Semi-monthly: In a semi-monthly pay cycle, employees receive their pay two times per month, often on the 15th day and the last day of the month, for 24 paydays per year. This number is arrived at by multiplying 12 months of the year by 2 paydays per month; that is, 12 × 2 = 24.
- Monthly: In a monthly pay cycle, employees receive their pay once every month, resulting in 12 pay days per year.
|
Pay Cycle |
Paydays per Year |
Calculation |
|---|---|---|
|
Daily |
260 |
5 working days/week × 52 weeks/year |
|
Weekly |
52 |
52 weeks/year |
|
Biweekly |
26 |
52 weeks/year ÷ 2 weeks |
|
Semi-monthly |
24 |
12 months × 2 paydays/month |
|
Monthly |
12 |
12 months/year |
3.3.2 Regular vs. Non-Regular Earnings
Regular earnings are payments made to an employee on a pay period basis for the duties performed. Although there are many different types of regular earnings, this chapter will emphasize salaries, piecework, hourly wages, vacation pay, shift premiums, and overtime. Please keep in mind that hourly wages, vacation pay, and overtime pay are dictated by employment standards in each jurisdiction, as discussed in Chapter 2. Regular payments are made regularly; that is, at an established frequency.
On the other hand, non-regular payments are not made each pay period and do not have an established frequency. In this chapter, we will discuss retroactive earnings, bonuses or incentive pay, vacation pay (where no vacation time is taken), and director’s fees.
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