The Advantages of Bi-Weekly Vs Semi-Monthly Payroll Chron.com

The Advantages of Bi-Weekly Vs Semi-Monthly Payroll Chron.com

It is vital to decide on the pay frequency or the amount of time between an employee’s paydays for a small business. The pay frequency of your business determines when you process your payroll and how often your employees get their salary. 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.

Don’t worry, you’re not going crazy, you just haven’t fully grasped the semi-monthly vs. bi-weekly payroll debate yet. Lucky for you, we’ve compiled a full guide on what makes these two types of payrolls different. It is easy to implement the contracted benefits if you are paying out benefits twice per month. You will be able to know the amount needs to be paid out with each payroll period by dividing the amount agreed upon by 24. Payroll software such as Paychex and ADP charges every payroll run. So, if you are using this payroll software, you can save money by processing lesser payroll runs.

Key Differences Between Semi-Monthly vs Bi-Weekly Payroll

Also, if a semi-monthly payday lands on a weekend or holiday, plans will need to be made in order to pay employees either before or after the break in the week. If you want to keep your budget consistent and put the same amount of money into payroll each month, a semi-monthly payment model would be a no-brainer. Just be sure to keep your employees updated on any advanced or delayed payments you will be making and everything will be just fine.

Two popular, yet easily confused, pay periods are biweekly and … 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. According to the Bureau of Labor Statistics, 36.5% of employees are paid biweekly.

How to Calculate Effective Hourly Payroll

With bi-weekly payroll, employees are paid 26 paychecks a year, compared to 24 like bi-monthly receives. Before choosing, keep in mind that states regulate how often employees must be paid and some states may not allow ceretain pay frequencies. Businesses should check with their state before choosing how often to run payroll. Because the payroll is processed fewer times for semimonthly frequencies than biweekly, employees’ paychecks will be greater. Biweekly paychecks will be be for less money, but employees will receive the two additional paychecks to make up the difference. If you run a biweekly payroll, employees receive their wages the same day each pay period.

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. Because semi-monthly pay is on two solid days per month, it can be inconvenient when holidays occur. If a payday falls on a federal holiday, or weekend, the payday will need to be pushed up. Because Semi-Monthly pay occurs on the same two days every month, it takes the guesswork out for employees. Employers do not have to hear “when do we get paid” because those days are solid.

“Bonus” Pay Checks

When you pay biweekly, there are some months with three pay periods, so you have to prepare for those months in advance. You will need to make sure you have enough money in your payroll account to cover the additional expenses of the 2 paychecks, since it’s not a cut and dry monthly equation. If you run biweekly payroll, employees receive their wages the same day each pay period. For https://kelleysbookkeeping.com/bookkeeper360-review-2023-pricing-features-more/ example, your employees are consistently paid every other Friday, so you run payroll on the same day each pay period. Another difference between semimonthly pay vs. biweekly pay is what day of the week you run payroll and which day employees receive their paychecks. In semi-monthly frequencies, payroll is processed fewer times than biweekly, so employees’ paychecks are larger.

The main difference is the level of effort each option puts on those who run payroll. Following a semi-monthly pay-schedule has its own advantages and benefits. You would think that since there are generally four weeks in every month, these would equal the same thing. Pay frequency is a critical decision that impacts everything from job satisfaction to business finances to the level of administrative support you need.

What Is a Semi-monthly Payroll?

And we provide you with the opportunity to offer financial wellness benefits to employees at no cost or lift to you. Changing your pay frequency means you also need to change paycheck and withholding amounts, such as for benefits and taxes. Though annual withholdings end up the same no matter which pay schedule you use, per-paycheck withholdings will be What to Expect from Accounting or Bookkeeping Services different according to how often you process payroll. Employees who are paid bi-weekly receive their wages the same day each period. For instance, you continuously pay your employees every other Friday, so on the same day each pay period, you run payroll. A semimonthly pay has a flexible structure, unlike weekly, biweekly, or monthly pay schedule.

You might not be able to use biweekly pay or semimonthly pay frequencies in certain states. Receiving up to two additional paychecks per month compared to a semi-monthly pay schedule is certainly a bonus for employees. For months where additional planning was not put in place, a small business may not have sufficient funds for a three paycheck month compared to a two paycheck month. When it comes to Semi-Monthly payroll, new hires will typically need to wait 4-6 weeks before receiving their first paycheck. This depends on the day they started in comparison to the payment schedule. For example, if an organization pays based on the previous period like the 16th to the end of the month.