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Semi-Monthly vs Bi-Weekly Pay: What's the Difference?

If you own a business and have a bunch of employees, you might wonder what the best payroll schedule is for them. The most common strategies are semi-monthly and biweekly. Semi-monthly gets your employees paid twice every month consistently, while biweekly gets them paid every other week, regardless of how many weeks fall under a month.

What are their similarities and differences? Which one is better, and which one should you choose for your business? Let’s take a closer look at what these two strategies actually mean and what characteristics make them ideal.

What is semi-monthly pay?

Semi-monthly pay means consistently releasing two payrolls for every month. Usually, this plan applies to regular full-time employees. Also, the payout happens every 15th and final day of the month.

This means that in a semi-monthly pay program, you can equally subdivide the annual salary into two monthly payments. With twelve months in a year, your employees can expect to receive a total of 24 paychecks annually.

From a weekly perspective, each semi-monthly pay will be equivalent to a little bit more than two weeks’ worth of income (2.16667 weeks’ worth of payment, to be exact).

salary cash on a calendar

What is biweekly pay?

Biweekly pay, as the name suggests, is releasing paychecks consistently every two weeks, regardless of how many weeks there are in a month. That means that there is no specific date for payroll release. 

Usually, there is a specific day of the pay week. For many companies, it is mostly every other Friday, regardless of the month. This strategy is more common among employees who get paid on an hourly basis.

If you count all the weeks in a year, on a biweekly payment strategy, your employees will receive a total of 26 paychecks annually. 

Advantages of semi-monthly pay

These are the advantages you can expect from a semi-monthly pay program. 

Fewer payrolls to process

In a semi-monthly payment strategy, there are two fewer payrolls to process. This may not be much, but it somehow lifts the burden off your finance or HR personnel. It is also more efficient because there are fewer month-end entry adjustments needed.

Less complicated to lay out deductions

Taxes, health insurance, and other possible deductions are simpler to calculate because it will be the same amount every month. As a result, your employees will know exactly how much they can anticipate in terms of salary deduction.

Date-consistent

Semi-monthly payments always occur on the same date (usually the 15th and the last day of every month). This makes the salary date easier to remember and even to mark it down on a calendar. However, should the chosen dates fall under a holiday or a weekend, the salary date will need temporary adjustment.

Cost-effective

In connection with having fewer payrolls to process, adopting a semi-monthly payment plan can save you money as an employer. This is especially true if you’re hiring a payroll service to do it for you. If not, it can save you valuable time that you can invest in other aspects of growing your business.

Advantages of biweekly pay

Biweekly pay strategy also has its own advantages, namely;

More predictable

Employees can expect their paychecks on the same day every other week. This is sometimes more predictable than anticipating the 15th and the last of the month, which can fall on varying days and may even fall under a holiday and need to be adjusted. 

Straightforward way to calculate overtime pay

Since you usually calculate the pay in two-week increments, it is easier to factor in the overtime since the increments are always fixed. You will never have to split overtime pay into two payment cycles since the overtime basis is weekly.

More transparent

Employees will not need unique formulas to calculate their pay per cycle since it is in two-week increments. This efficiently enforces a feeling of trust and transparency between employer and employee and eliminates or at least minimizes a lot of questions about salary, overtime computation, and deductions.

Payments are unaffected by weekends

As stated previously, semi-monthly payments can get affected by weekends. What usually happens is that the salary date gets moved to the nearest working day to make up for the displacement. If you pick Friday as your salary day in a biweekly payment plan, it stays consistent every other week, unaffected by weekends. 

Conclusion 

Both payroll plans are efficient and effective with the right working schedule. For full-time employees that have regular deductions and benefits, a semi-monthly pay strategy will likely work best. However, for employees that are paid by the hour and may have irregular hours per week, a biweekly payment plan is ideal.

Resources

To help you further become familiar with and more efficient with your personnel’s payroll, here are a few online courses you can try:

Quickbooks Online Payroll

With this course, you can better understand the payroll process so that you can do it more efficiently. It teaches you all about the basics of Quickbooks, with an emphasis on payroll, which you can apply in practice or train to your payroll staff. 

Aside from setting up and processing payroll, you will also learn how to troubleshoot common payroll challenges. With this course, you can confidently tackle any payroll concerns and conduct the process seamlessly and effortlessly.

Accounting Fundamentals For Employers And Employees: Read, Understand And Analyze Financial Statements

If you want something broader that tackles payroll along with other accounting fundamentals, this course is perfect for you. It is the ideal course for beginning accountants, bookkeepers, and business owners to handle financial statements confidently.

This course is all about accounting basics, the definition of the accounting equation, and identifying and analyzing different financial statements, including those that involve employee salaries.

Ready to improve your employee payroll strategy? Click here to get started.

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