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Deciding on a pay frequency for a small business is an important decision. Pay frequency determines how often the business must process payroll and when employees receive their paychecks. There are four common pay period options, including weekly, biweekly, semimonthly, and monthly. Two popular, yet easily confused, pay periods are biweekly and semimonthly.
In a bi-weekly approach, the employee is paid after every fortnight while in the semi-monthly approach payments are done twice a month this can be on the 15th and last date of a month. As noted, the first benefit holiday will occur on December 30th, 2022. That means you will receive three paychecks in December, the third of which will not include flexible benefit (i.e. healthcare) deductions.
Semi-monthly pay period (24 paychecks per year)
Companies that use semimonthly pay give employees 24 paychecks per year. Whether a business’s employees are salaried or hourly, it will likely make sense for them to choose one pay frequency over the other. For example, it can be more difficult to process the paychecks of hourly employees on a semi-monthly basis than on a bi-weekly basis. Because hourly wages are easier to calculate on a bi-weekly basis, as each paycheck accounts for the same number of days. Conversely, semi-monthly paychecks will vary in the number of days they include, making it more challenging for whoever handles the company’s payroll.
- 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.
- If you run biweekly payroll, employees receive their wages the same day each pay period.
- These are important questions every business owner has to figure out when managing payroll.
- Since every calendar year has 52 weeks, this results in a total of 26 paychecks per year.
- Semimonthly pay schedules for salaried employees are straightforward.
- Biweekly paychecks will be be for less money, but employees will receive the two additional paychecks to make up the difference.
- A biweekly payroll schedule will typically be seen in the eyes of your employees as “dependable” and “consistent”.
Semimonthly pay may be included with other forms of payroll to meet the needs of the organization and employees effectively. If you’re running payroll yourself, you’ll want to consider if you can run payroll weekly, biweekly, semimonthly, or monthly. If you’re outsourcing to a payroll provider or accountant, they may charge a service fee for every payroll run. But if you’re using a payroll service for your small business, you may not have to pay extra for every payroll run.
Biweekly Pay
The one downside to biweekly payments is the inconsistency in how much money you are paying out each month. There will always be a couple of months where you will have three paydays instead of two. It will be up to you and your accountant to make sure you will have enough to cover the extra payout. With a biweekly pay schedule, there are two months in the year where employees receive three paychecks. Employees who are paid semimonthly always receive two paychecks per month. Companies that run payroll with a biweekly frequency dole out a total of 26 paychecks per year.
- For example, currently, hours worked for a period of 8/1 through 8/15 are paid on 8/15.
- Earned wage access or on-demand pay can be a valuable financial wellness benefit for hourly employees.
- For HR teams, these same qualities make weekly pay cycles a nightmare to administer.
- While taking care of their interests, they also need to give due consideration to the state regulations.
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. Before choosing, keep in mind that states regulate how often employees must be paid and some states may not allow ceretain pay frequencies. Businesses https://investrecords.com/the-importance-of-accurate-bookkeeping-for-law-firms-a-comprehensive-guide/ should check with their state before choosing how often to run payroll. Two popular, yet easily confused, pay periods are biweekly and … When a semimonthly payroll is used, processing steps constantly shift around among different days of the week, since the pay date is not fixed on a specific day of the week.
Biweekly vs. Semi-Monthly Payroll: What’s the Difference?
For full-time salaried employees, biweekly schedules typically account for 80 hours of work. However, semimonthly paychecks for full-time The Importance of Accurate Bookkeeping for Law Firms: A Comprehensive Guide salaried employees account for 86.7 hours of work. Employers may find paying hourly employees on a biweekly schedule simpler.
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. 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.
Pros of SemiMonthly Pay
We’ll also talk about the instances when you might want to change your payroll frequency, offering your employees earned wage access (EWA), and how you can go about it. Running semimonthly payroll can also be difficult to track when weekends and holidays come into play. If a pay day falls on a weekend or holiday, you have to decide to either advance or delay payroll for that pay period, which adds another responsibility to your plate. 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.
