Biweekly vs Semi-Monthly Payroll: What’s the Difference?

For payroll accounting purposes, there are 26 pay periods per year for a biweekly payroll system. Most months have two pay periods, but two months of the year will have three. For full-time hourly workers, each paycheck accounts for roughly 80 work hours.

• With a semi-monthly pay schedule, you’ll pay your employees twice per month on specific dates—most commonly on the 15th and the last day of each month.
• The gross amount of the bridge payment represents 3.2% of your annual salary.
• Since the commission and hourly wages need to be divided between two different pay periods, it can be difficult for employers to adjust without needing to do it separately.
• Choosing how to pay your employees is a decision that might seem simple enough on the surface, but it really does require some thought.
• That way, employers don’t have to wait for current timesheets before they can run payroll.
• If having set paydays that coincide with when your clients pay you is a large consideration, a bi-monthly pay system could be the right choice.
• A biweekly payment structure is generally easier for the employee, as semi-monthly payroll periods make it trickier to predict payment day, as this will change monthly.

When a semimonthly payroll is used, processing steps constantly shift around among different days of the week, since the pay date is not fixed on a specific day of the week. The difference between a semimonthly and a biweekly payroll is that the semimonthly one is paid 24 times per year, and the biweekly one is paid 26 times per year. A semimonthly payroll is paid twice a month, usually on the 15th and last days of the month. If one of these pay dates falls on a weekend, the payroll is instead paid out on the preceding Friday. A biweekly payroll is paid every other week, usually on a Friday.

How do I Calculate Bi-Weekly Net Salary?

Most of the time, these terms are interchangeable, but not always. We’ve covered a lot about the different payment frequencies already. But, if you’re still feeling stumped about which choice is right for you, below are a few tips to keep in mind. In a perfect world, employees would be able to choose a pay cycle that works best for them, or better yet, simply let them get paid whenever they need it.

For example, the employer may track hours for the first and second week of the month but pay in the third week. That way, employers don’t have to wait for current timesheets before they can run payroll. Twice each year, employees who are paid bi-weekly receive a third monthly paycheck, increasing their take home pay for the month. Even though this extra “bonus” check is expected, it helps make it easier to meet savings goals or reduce debt in those months if the employee has a personal budget. When your employees are getting paid biweekly, that means that payday occurs once every two weeks, and typically on the same day of the week (Friday is the most common payday).

What is a Bi-Weekly Payroll? How Does it Differ From a Semi-Monthly Pay Schedule?

Things further complicate when overtime pay is earned by the employees. It can prove to be demotivating for the employees who have to spend hours together on their Remote bookkeepers job to earn the money necessary to meet their various expenses. Yet each payment schedule has some key differences and choosing the right one is crucial.

• Since employees get paid around the same time as the business makes money, it is easier to pay them on time.
• An exploration into some of the key differences between a bi-weekly and a semi-monthly payroll schedule.
• Given the ease of calculation and consistency, bi-weekly payroll schedules offer benefits for both employers and employees.
• This method is preferred by companies who pay their employees on an hourly basis and need to keep a reliable payment schedule.
• Picking between bi-weekly and bi-monthly payroll periods is really up to the business.

When you pay employees semimonthly, you can count on paying the same amount to employees each month. The extra two paychecks for biweekly pay frequencies can set your business back if you don’t properly prepare for months with three paychecks. You will need to make sure you have enough money in your payroll account to cover the additional expenses.

“Bonus” Pay Checks

Over the course of years, the extra day in a leap year will have to be accumulated and added onto an extra paycheck. In this case, 26 times a year payments will become 27 times, adding additional costs to payroll processing. Semi-monthly payroll will always and only ever happen 24 times https://kelleysbookkeeping.com/how-much-does-bookkeeping-cost-for-a-small-to/ in a year. In a biweekly pay period or schedule, the employee is set to receive a paycheck every other week. Usually, the employers distribute pay checks on Fridays sticking to the same day every pay week. Thus, in this pay period, the employee receives 26 pay checks annually.

Here is a detailed bi-weekly vs semi-monthly pay differentiation. In general, bi-weekly payrolls are used by companies that pay their employees a low to average hourly wage. If your employees punch in and out and work a different amount of hours each week, then a bi-weekly payroll will make more sense. Keep in mind that employees who volunteer to work more hours may be doing so because they need more cash flow that week. Having Payroll and Time Tracking in BambooHR makes gathering hourly payroll information and submitting it correctly much simpler.

Cons of running a semimonthly payroll

This is not only confusing for employees, but requires extra work on the part of your bookkeeper to make sure you fulfill your legal obligations regarding paying overtime. This isn’t a problem with salaried employees, and you might consider using different pay schedules for salaried and hourly workers. Businesses with hourly employees or commission employees may not find a semi-monthly frequency is the best option. When overtime and specific hours need to be determined weekly, it can be challenging to adapt to a semi-monthly pay schedule.

Say the pay periods in a month are the 1st through the 15th and the 16th through the last day of the month. Payday is every other Friday, for the time reported in the previous pay period. The result is that there is a two-week lag between the time when hours are reported and when the employee is paid. Finding the right payroll cadence for your business is important. Hopefully, by understanding each option, you can choose the right payment schedule for your small business. Semi-monthly usually means that two payments are made each month.