If you're running any sort of business that employs people, an aspect that begs your attention is the pay frequency for your employees. There are two commonly used pay schedules - semi-monthly and bi-monthly. Many times, people get confused between the two.
Depending on several factors, employers choose to pay their employees biweekly, weekly, monthly, and semi-monthly. In this article, we'll discuss the difference between bi-weekly and semi-monthly pay periods. Depending on the choice made between the two, the budget of a company is impacted.
Here's what this article will cover:
- Key Differences between Bi-monthly and Semi-monthly
- How many pay periods are there in a year?
- What is a semi-monthly pay schedule?
- What is a biweekly pay schedule?
- What is the difference between semi-monthly pay and biweekly pay?
- Pros of Semi-monthly pay period
- Cons of running a semi-monthly payroll
- Pros of Bi-weekly pay period
- Cons of running a biweekly payroll
- Choosing between semi-monthly vs. biweekly payroll
Key Differences between Bi-monthly and Semi-monthly
There are several differences between both pay periods. Here is a detailed bi-weekly vs semi-monthly pay differentiation.
- The biweekly payroll is when the payment is processed every two weeks. Conversely, semi-monthly pay occurs twice per month. It can be on every fifteen days, that is, on the 15th and the last day of the month.
- Biweekly employees receive 26 pay checks in a year while the semi-monthly employees receive 24 pay checks in a year.
How many pay periods are there in a year?
There are four types of pay periods.
- Weekly Pay- In a weekly pay period, employers need to pay their employees at the end of every week resulting in 52 pay periods annually.
- Biweekly Pay- In a biweekly pay period, employers need to pay their employees on a specific day every two weeks. It results in 26 pay periods in a year. Knowing about bi-weekly vs bi-monthly payroll differences can help make the right decision.
- Monthly Pay- In a monthly pay period, employers need to pay their employees once a month on a specific day. Since it works on a monthly schedule, it results in 12 pay periods in a year.
- Semi-monthly Pay- In a monthly pay period, employers need to pay their employees twice a month on a specific day. It is usually the 15th and the last day of the month. Since it works on a semi-monthly schedule, it results in 24 pay periods in a year.
What is a semi-monthly pay schedule?
If your company follows the semi-monthly pay schedule, you'll receive your paycheck two times in a month. 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. Usually, such payments are done on either the 1st or 15th day of the month or on the 15th and the final day of the month.
As per the semi-monthly schedule, the employees get 24 checks in a year. Since the number of days in a month varies, some pay checks may be smaller or larger than the others. For instance, in the month of February, the second paycheck would cover only 13 or 14 days when in the rest of the months, it covers 15 or 16 days. Depending on whether you are a salaried, permanent employee, the total yearly salary may be divided into 24 checks by the employer.
What is a biweekly pay schedule?
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. If an employee earns a fixed amount or is salaried, the pay check received will be of the same amount every time it is received. In the case of hourly pay, the amount in the paycheck may differ as it will be as per the number of hours worked in that specific pay cycle. It also includes overtime.
What is the difference between semi-monthly pay and biweekly pay?
There are a lot of differences between semi-monthly pay and biweekly pay and deciding which is better biweekly or semi-monthly pay, is slightly challenging. Also, it shall depend on multiple factors.
It is prudent to understand here that whether a salaried employee is paid biweekly and semi-monthly, it will leave no impact on the annual pay drawn by you. Regardless of the payment schedule, the employee will get the same amount annually. The only thing that matters here is the amount in the check and how frequently you get the same.
Let us ponder over what is the difference between semi-monthly and biweekly pay periods with the help of an example.
If an employee is earning $50,000 every year and is getting paid as per a semi-monthly pay schedule, he will get a paycheck of $2,083.33 gross. This amount is derived by dividing fifty thousand dollars by 24 as there are two pay cycles every month.
Now, if we discuss the biweekly pay schedule, the employee earning $50,000 yearly will get his pay divided across 26 pay cycles. Thus, each paycheck will be $1,923.08 before deductions every other week. The amount may seem to be less but then the employee is also getting two additional pay checks in a year. Getting two additional checks results in extra savings and better management of various expenses. The employee can budget his finances better.
Whether a person is a non-salaried full-time employee, the same figures hold true. The only difference between bi-monthly and semi-monthly pay periods is that each paycheck amount gets adjusted including time off or overtime took in a specific pay cycle.
Pros of Semi-monthly pay period
Following a semi-monthly pay-schedule has its own advantages and benefits. Here are a few of them.
- The payment date never changes- In the case of a semi-monthly pay schedule, the exact days on which an employee is paid never change. Knowing that the paycheck will be received on a specific day helps an employee in creating a budget and manage the household and other expenses. He can also easily schedule monthly payments of various bills. This money proves to be a great help for managing their expenses thus it is important to stick to a specific date.
- Cost-Effective- The business finds sticking to the semi-monthly schedule costing them less as they have to run this semi-monthly only twice in a month. It helps in reducing the cost of payroll service payment. It also helps in reducing the time cost of the employees who are responsible for managing the payroll.
- Easier to Anticipate Deductions- Employees find it easier and convenient to calculate their takeaway pay when their payroll deductions every month are equally divided amidst two pay checks monthly. The deduction stays the same every month as there will be no additional monthly paycheck. Thus, things are clear and transparent for the employees.
Cons of running a semi-monthly payroll
After considering the number of employees working and how many of them are salaried and hourly, the decision of running a semi-monthly payroll must be taken. This way, employers can arrive at the right decision.
Slightly Confusing- This payroll schedule is slightly confusing especially when running it for hourly employees. 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 job to earn the money necessary to meet their various expenses.
Lack of Consistency- Another con of this payroll schedule is its lack of consistency which can prove to be a turnoff for employees and businesses. In this case, payroll gets processed on a different weekday, the employee who is running payroll seems to lose track of this responsibility.
Lack of Certainty- Moreover, there is a lack of certainty for the employees regarding which date they are going to get paid. The holidays and weekends coming into the play also create confusion about the payday. In case of holidays or weekends, the payment needs to be done in advance or delayed. This not only creates a lot of confusion but also disheartens the employees.
Pros of Bi-weekly pay period
When discussing the semi-monthly vs bi-weekly payroll, it is important to check the pros and cons of the biweekly pay period as well. Here are a few benefits if a bi-weekly pay period.
- It is predictable- Bi-weekly pay period is quite predictable as the payment is received by the employees on the same day every two weeks. In the case of semi-monthly checks, the pay checks are issued every month on the same date but not necessarily on the same day. Employees anticipate their hard-earned money on this day with plans already about how to spend it to manage their basic needs and more.
- Easier to Calculate Overtime- Many employees indulge in overtime and calculating the same in biweekly payroll is easier. This overtime pay is calculated based on the work completed in the entire workweek. Thus, this pay period covers complete two weeks and does not split overtime amidst two pay cycles. This reduces a lot of confusion that occurs when calculating overtime hours.
- Extra Paycheck- Another benefit of using a biweekly pay period is the extra paycheck the employee gets in a year. The additional pay checks help them in managing their debts and add something to their savings. Employees with kids can use the paycheck to save something for their kids’ education and college fees. There are numerous ways where this extra paycheck can prove to be very helpful.
Cons of running a biweekly payroll
Just like the semi-monthly pay period, there are a few cons of running a biweekly payroll. Having proper knowledge of them shall help in making the decision which is just right for them. Here are a few of them-
- Challenging Budgeting- Getting two additional pay checks is undoubtedly a benefit but can turn out to be a con if the business does not prepare properly for months when the employee gets three pay checks. The business also needs to ensure that it has sufficient money to cover these additional expenses.
- Higher Annual Costs- For businesses running bi-weekly payroll have to handle higher annual costs. They can overcome these costs only if they are able to find a provider who runs unlimited payroll runs irrespective of frequency.
Having an in-depth understanding of the difference between bi-weekly v semi-monthly payrolls can help a business make a well-informed choice while considering various other relevant factors. This knowledge and understanding are advantageous for the business as a payment schedule can be chosen that is to its best advantage. Employees are also in a position to anticipate how much amount can be received in every paycheck. This helps them in budgeting their finances and making proper plans for the future.
Choosing between semi-monthly vs. biweekly payroll
After knowing the differences between semi-monthly vs bi-monthly payroll cycles, businesses and employers can make a choice between the two. Businesses consider various factors that help them to decide between the two options. It is prudent to go through the pros and cons of both options, weigh both of them, and then, finally decide which payroll options are best suited for their purposes.
While taking care of their interests, they also need to give due consideration to the state regulations. In many states, there are regulations about how often the employees need to be paid. Thus, it is important to check the frequencies of payment in different states before arriving at the final decision.
Your employees work very hard for you and put in a lot of time and effort in the job given to them. They expect timely payments to be made so that they can handle their household expenses and also save something for their future. Thus, businesses must arrive at a decision that is mutually beneficial for both of them. Choose a pay period that is beneficial for the employee, employer, and the business.
