When it comes to the way that your company handles payroll, you might find that there are various options available for you. State law will typically specify the time frame within which employees must legally get paid. That doesn’t mean, however, that you can’t pay your employees more frequently; the time frame that State law specifies serves as a minimum.
Generally, employers will usually pay their employees on a biweekly or semi-monthly basis. So, what is the difference between a biweekly payment and a semi-monthly payment?
Differences in Payroll Frequency
Did you know: Semi-monthly employees will receive 24 paychecks in a year, whereas biweekly employees will receive 26 paychecks per year? It might sound confusing – after all, a biweekly and a semi-monthly payroll seem like they should be very similar payment strategies, and to a certain extent, they are. The most significant difference between the two is that a biweekly payroll happens according to a specific day, whereas a semi-monthly payroll is paid out on two specific dates.
In an ideal world, there would be four weeks in every month; however, this is not always precisely the case. If employees get paid biweekly, then they would know to expect a payment, every other Thursday, for example. If you are running a semi-monthly payroll period, however, they know that they will receive a payment on the 7th and the 21st of the month.
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. This constant change in payment day means that payments may occur during a holiday, a Saturday, or even a Sunday. Should this be the case, most of the time, employees will automatically receive their payment on the last working day before the holiday or weekend.
Differences in Payroll Processing: Salaried Workers
Handling the payroll for biweekly salaried employees and semi-monthly salaried employees presents a difference in how they are processed.
Full-time salaried employees are typically paid for 2,080 work hours yearly, and this must be delivered to employees regardless of the pay frequency. The difference is that full-time biweekly salaried employees will be paid for 80 hours each payday. Full-time semi-monthly employees will receive 86.67 hours of pay per paycheck.
The hourly difference occurs because of the distinction in the number of paychecks the employees will receive. For a biweekly employee, you must divide 2,080 by 26 pay periods (every two weeks). For a semi-monthly employee, you have to divide 2,080 by 24 pay periods (twice a month).
To get the salary for either of the pay groups, you need to divide the annual salary by the number of pay periods.
To give you an example of how this might look in reality, consider the following example.
An employee earns $27,000 a year.
- If he or she gets paid biweekly: $26,000 divided by 26 = $1,000 per pay period, every other Friday.
- If he or she gets paid semi-monthly: $26,000 divided by 24 = $1,083.33 per pay period, on the 10th and 28th of each month.
Differences in Payroll Processing: Hourly Workers
Moreover, calculating the salary for hourly biweekly employees is the easiest payroll process. It is the easiest because you can simply pay the employee according to the number of hours that they worked in the preceding two weeks. So say, for example, a member of staff worked 37 hours over the past two weeks, they would get paid for 37 hours in their biweekly paycheck. If in the next two weeks they work 45 hours, they would get paid for 45 hours.
On the other hand, semi-monthly hourly payroll processing can be a little more confusing. You may need to specify that the pay period ends earlier for semi-monthly payments than biweekly payments. You may even want to issue your employees a payment calendar so that they understand which pay period their paycheck is covering.
If your employee worked 12 days for the first pay period, and then 13 days for the next period, each paycheck would be for different amounts.
Some employees may choose to pay hourly semi-monthly employees for 86.67 hours, and then make adjustments on the next pay period. This, however, can be risky; for example, if an employee leaves your company without making adjustments, they will not pay back the estimated hours. It should be avoided as much as possible to prevent such mistakes from happening.
Biweekly vs. Semi-monthly: Which Works For You?
To make payroll processes and employees’ lives easier, some employers will choose to pay both their hourly and salaried employees biweekly. On the other hand, others find it easier to pay their hourly employees biweekly and their salaried employees semi-monthly.
For obvious reasons, paying your hourly staff biweekly makes it a much easier and less troublesome way to calculate your employee payment amounts. Yet, it is less expensive to process salaried workers semi-monthly. Remember, a semi-monthly payroll requires less processing, as it happens 24 times a year rather than 26 times a year, and so can save the company money.
Paying your salaried workers biweekly is tricky when you have to stop and factor in leap years. 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 in a year.
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