Monthly salary or four-weekly pay?

 

When you employ people, you can choose to pay their salary monthly or every four weeks. Most employers pay salaries on a monthly basis, but four-weekly payroll cycles are also common in some organisations and industries.

So, what are the differences? And what are the advantages of each system for employers and employees? In this article, we explain how both options work.

The difference between monthly salary and four-weekly pay

With a monthly payroll cycle, employees receive their salary every month on the same date. In many organisations, this is towards the end of the month, for example around the 25th. If the payment date falls on a weekend, the salary is usually paid on the next working day or on the Friday before.

With a four-weekly payroll cycle, employees receive their salary every four weeks on the same day of the week, for example every Wednesday. This does mean that the actual payment date changes throughout the year.

Most organisations pay employees monthly on a fixed date. However, in some cases, a four-weekly payroll cycle can be more practical.

Four-weekly pay: advantages and disadvantages

For employees

One advantage for employees is that they are paid 13 times a year instead of 12. This means there is always less time between salary payments.

However, being paid more often does not mean receiving more salary overall. The annual salary is simply divided by 13 instead of 12.

Advantages:

  • Employees receive their salary more often.
  • There is less time between two salary payments.

Four-weekly pay can also be inconvenient for employees. Many regular expenses, such as rent, insurance, utilities, subscriptions and internet, are paid monthly. With a four-weekly payroll cycle, the date on which employees receive their salary changes each time. This means there may be moments when salary is paid after several direct debits or recurring payments have already been collected.

The best way for employees to manage this is to keep a close eye on their personal finances. For example, they may need to maintain a buffer in their current account or savings account.

Disadvantages:

  • Regular monthly expenses may be deducted before salary is paid.
  • Employees need to plan ahead and keep a buffer available.

For employers

Most companies pay salaries monthly. So why would an organisation choose four-weekly pay?

In many cases, the reason is linked to financial administration. If your organisation works with financial periods of four weeks, it can be useful for payroll administration to follow the same cycle.

Advantages:

  • If your organisation works with four-week financial periods, payroll administration aligns neatly with your financial reporting cycle.

A possible disadvantage for employers is that some years contain a 53rd week. This can create an inconsistency in a four-weekly payroll cycle, both for employees and for payroll administration. There are usually two ways to solve this:

  • Pay the final payroll period over five weeks. The last period then includes one extra week.
  • Pay the final week separately. The second-to-last period remains four weeks, and the final period consists of one week.

Disadvantage:

  • In years with a 53rd week, the four-weekly payroll cycle does not align perfectly.

 

Example calculation

This calculation shows how monthly salary and four-weekly pay compare. To keep things simple, we will leave out holiday allowance, bonuses, allowances and any additional salary components.

Suppose an employee has an annual salary of € 36.000,-.

If the employee is paid monthly, they receive 12 salary payments: one per month. This means they receive €3,000 per month: €36,000 / 12 = €3,000

If the employee is paid every four weeks, they receive 13 salary payments: one every four weeks. 52 weeks / 4 = 13 In that case, they receive €2,769.23 every four weeks: €36,000 / 13 = €2,769.23 The total annual salary remains the same. Only the timing and frequency of the payments are different.

Converting four-weekly pay to monthly salary

Do you currently receive a four-weekly salary and want to convert it to a monthly salary? You can calculate it easily. Use the following formula: Four-weekly salary × 13 / 12 = monthly salary

Using the example above: €2,769.23 × 13 / 12 = €3,000

For a quick estimate, you can also multiply your four-weekly salary by 1.083.

Calculating a 13th month with four-weekly pay

The calculation for a 13th month based on four-weekly pay is similar to the calculation based on monthly salary. However, you first need to convert the four-weekly salary into a monthly salary. You do this by multiplying the four-weekly salary by 13 and then dividing it by 12, as shown above.

Once you know the monthly salary, you can calculate the amount of the 13th month using the following formula: 13th month = monthly salary × 13th month percentage.

Suppose the 13th month is calculated as 8% of the monthly salary. In that case:

13th month = €3,000 × 0.08 = €240

In this example, the 13th month is €240.

Monthly salary: advantages and disadvantages

For employees

Does your organisation pay salaries on a fixed date every month? That is no surprise, as monthly payroll is the most common approach for many companies. Society is also largely structured around monthly payments.

As mentioned earlier, most regular expenses are paid monthly, often towards the end of the month. This is usually just after employees have received their salary. That makes budgeting easier, because employees know exactly how much they have left for the rest of the month.

With monthly salary payments, employees are less likely to run into timing issues with important payments.

Monthly payroll also makes personal administration easier. Employees know exactly when they can expect their salary and how much will be paid. That said, this level of insight is also possible with a four-weekly payroll cycle. With AFAS software, for example, employees can view their salary payments in the AFAS Pocket app.

Advantages:

  • Monthly salary payments align well with monthly expenses.
  • Employees know exactly when they will receive their salary each month.
  • Personal budgeting is often easier.

For employers

When you pay salaries monthly, payroll administration is processed 12 times per year. With a four-weekly payroll cycle, payroll administration is processed 13 times per year.

This is not a major issue when payroll administration is automated. But if processes are still manual or partly manual, the additional payroll run can be an important reason to choose monthly salary payments.

Advantage:

  • Payroll administration is processed 12 times per year instead of 13.

However, monthly salary payments can also be inconvenient for some organisations. If your financial periods are based on four weeks instead of calendar months, payroll administration may not align with your financial reporting. In that case, a four-weekly payroll cycle may be the better fit.

Disadvantage:

  • If your organisation works with four-week financial periods, monthly payroll may not align with your financial administration.

Millions of employees already receive their payslip through AFAS. When will you start?

Whether you pay salaries monthly or every four weeks, AFAS helps you automate payroll administration with ease. Our international payroll software supports organisations in running accurate, efficient and scalable payroll processes. Employees get clear insight into their salary payments, while HR and payroll teams benefit from automated workflows, reliable calculations and fewer manual tasks