While the amount of money paid out per month will ultimately be similar, the average paycheck amount per payday will be different. The average semimonthly pay schedule can cover up to days of work between paychecks, whereas a biweekly pay schedule can only cover a maximum of 14 working days. 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.

For some businesses, the payroll expense can be the highest incurring expense monthly. Employee salaries and labor wages are decided upon employment contract terms signing. Monthly payroll offers https://www.bookstime.com/ easier-to-manage benefit deductions since you only have to factor out the monthly cost. And processing payroll only has to happen once a month, making it less time-consuming than other options.

Processing of Payroll on a Hourly Basis

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. You need to consider how many employees you have and whether those employees are hourly or salaried.

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. semimonthly vs biweekly 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.

Bi-Weekly Cons

Semi-monthly usually means that two payments are made each month. Many people stick with the traditional 1st and 15th but it’s possible to choose other dates if they make more sense for you financially. The difference in number of pay dates is offset by dividing the yearly salary by the pay periods or the yearly hours by the pay periods. Bi-weekly and Semi-monthly approaches are both payment systems applied by employees globally. The only difference will be the effects of deductions in the short-term as higher payroll frequency means a lower paycheck each time. Tax liability for the employees is calculated for the total yearly income. With predefined employment contracts, the total yearly salary is supposed to remain the same.

It can determine the type of talent you attract and the long-term expenses you incur as a business. The right pay schedule will benefit both you and your employees. 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. Only 19.8% of employees, on the other hand, are paid on a semimonthly basis. Something that happens every two weeks also happens twice in a month, so bi-weekly and semi-monthly are de facto synonyms. On average on the bi-weekly system compensates the employer for 86.7 hours on each pay period. Using payroll processing services come with fees and charges.

What is Semimonthly Payroll?

Since you’ll always have two paychecks per month, deduction amounts will always be the same. If you are a salaried employee, the payment schedule you receive may not change the amount you’re paid each paycheck. Even if you’ve never come across a semimonthly pay schedule before, you shouldn’t worry about how often you’ll be paid. You’ll receive 24 paychecks per year, which is ultimately not very different from a biweekly schedule.

• They can overcome these costs only if they are able to find a provider who runs unlimited payroll runs irrespective of frequency.
• Bimonthly payroll processing can introduce more challenges compared to the biweekly approach.
• A semimonthly paycheck is computed by dividing the net annual pay by 24.
• Paydays typically occur on the 15th and last day of the month.
• Furthermore, biweekly paychecks are smaller, but employees will receive two extra paychecks to make up the difference.

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. If you have hourly workers who earn overtime, it’s easier for an employee receiving bi-weekly pay to calculate the effects of working extra hours on his next paycheck. Because you calculate overtime based on a 40-hour workweek, a bi-weekly paycheck limits the crossover of overtime on paychecks that can occur with a semi-monthly paycheck.

Summary: Semi-Monthly Pros & Cons

Hourly based employees usually prefer shorter paycheck cycles. The employer may choose different paycheck cycles for both categories provided the practice remains consistent. Therefore, the total gross income of the employees is predefined. It’s a common phenomenon with large businesses to have a large number of hourly based workers and a small group of high-pay fixed salary employees. Other payment systems have to adjust to the infrequent leap year day and odd-numbered days.

It should be avoided as much as possible to prevent such mistakes from happening. A bi-weekly check can help employees manage funds and finances. Except for holidays they can expect their checks on the same day every two weeks.

More Consistency for Employees

Bimonthly payroll processing can introduce more challenges compared to the biweekly approach. With biweekly, payroll staff take the same steps on the same days every two weeks. You do not designate a set weekday for processing, which makes it more challenging to maintain standard practices.

• Running semimonthly payroll can be particularly difficult to track when weekends and holidays come into play.
• Harold Averkamp has worked as a university accounting instructor, accountant, and consultant for more than 25 years.
• Now, if we discuss the biweekly pay schedule, the employee earning $50,000 yearly will get his pay divided across 26 pay cycles.
• Employers do not have to hear “when do we get paid” because those days are solid.
• The difference is that full-time biweekly salaried employees will be paid for 80 hours each payday.
• One of the checks will be received in mid-month and the second check will arrive either at the beginning of the next month or on the last day of the current month.
• With a semimonthly payment schedule, employees always receive two paychecks each month.

Here are some of the benefits of bi-weekly and semi-monthly pay schedules so you can make an informed decision on which is right for you. Bi-weekly payroll for employees provides less consistency in your budgeting, since some months will have three payrolls and others two. You’ll also have different amounts for benefits calculations in some months. However, the extra accounting work for bi-weekly payroll is not significant and might be worth it to maintain employee morale.

Is Biweekly or Bimonthly Pay the Better Method?

Employers, fixed and hourly salaried employees all have their considerations for both these choices. So it’s wise to elaborate on the pros and cons of both choices against each of the participants separately. Semimonthly and biweekly aren’t the only payroll schedules available. Now that you’ve determined which payroll frequency is right for you, it’s time to compare service options. Payroll is one of the most important aspects of running your business, yet shopping for payroll services can be confusing. A notable benefit of semi-monthly pay is that it aligns with the business’ cycle. Since employees get paid around the same time as the business makes money, it is easier to pay them on time.