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BiWeekly vs SemiMonthly Payroll
One of the most important decisions you’ll make when setting up your company’s payroll is how often to pay employees. The vast majority of employers choose one of four pay periods: most go with biweekly (every other week) or semimonthly (twice a month); while others decide to pay every week or once a month.
It’s common to confuse biweekly and semimonthly pay frequencies, as they do have many similarities — for instance, neither results in employees receiving monthly pay or weekly pay. But there are also key differences.
So, if you’re wondering which pay frequency is right for your business and employee base, this guide will help you make an informed decision.
How Do Biweekly and Semimonthly Payroll Differ?
There are many factors to consider when determining a pay frequency for your business. In addition to making sure your chosen pay schedule meets federal and state requirements, you’ll want to consider how many paychecks your employees will receive each year – and whether this is a number they are happy with.
You’ll also want to weigh the compensation totals and your pay date, or the day on which your employees will receive their pay.
Number of Paychecks
On a biweekly pay schedule, your employees will be paid 26 times a year, on specific days of the week – such as every other Friday. This means your employees will usually receive two paychecks per month, except for a couple of months that will have three pay dates.
On a semimonthly pay schedule, your employees will be paid 24 times a year on specific dates – often the 1st and 15th of every month. Some businesses choose to make payments on the 15th and the last day of the month.
No matter which pay schedule you choose, your employees will take home the same total compensation and owe the same in taxes. The only difference will be in how these totals are broken up throughout the year.
Because they have fewer pay periods, semimonthly pay schedules result in larger paychecks. Biweekly pay plans, meanwhile, mean two more paychecks for your employees – so both schedules have their advantages.
If your employee Jane has an annual salary of $50,000, on a semimonthly schedule she’d receive $2,083 every pay period, before taxes and deductions ($50,000/24). On a biweekly pay schedule, she would receive $1,923 ($50,000/26).
The pay schedule you choose will also dictate when your employees receive their wages. With biweekly pay schedules, employees receive paychecks on the same day of the week, every other week. Many companies choose Friday as their biweekly pay date, but you can choose any date that suits you and your staff.
On a semimonthly schedule, your employees on the same two calendar dates each month. The day of the week these dates fall on will of course change. As a result, holidays will sometimes force you to change your pay date to either before or after your regularly scheduled date, so it’s crucial to plan accordingly.
This is particularly relevant if you work with a payroll service provider, which in such cases might move up the deadline for receiving your payroll files.
How Do I Choose A Pay Frequency?
Now that you know how each payroll frequency is structured, you’ll need to choose the schedule that’s right for you. Both biweekly and semimonthly payroll schedules work well for businesses, however there are pros and cons to both. Let’s take a look at some of the considerations of each frequency.
Biweekly Payroll Considerations
One of the biggest drawbacks of using a biweekly payroll schedule is the need to budget extra money for wages during those months with three pay periods. Depending how many employees you have, this amount could be significant. You’ll also want to be diligent in keeping track of when these three pay period months are, as forgetting to allocate the appropriate funds could result in a huge inconvenience.
If you’re using a payroll service provider that charges fees every time you run payroll, you’ll pay more when you use a biweekly schedule. If this is the case for your business but you want to stick to a biweekly pay frequency, consider a payroll service provider that charges a flat annual rate or per employee.
There are also the wishes of your staff to consider. if your employees want to always receive their pay on a certain day – such as Friday, to have money for the weekend – they may prefer a biweekly pay schedule.
Semimonthly Payroll Considerations
If you have employees who are paid hourly, a semimonthly pay schedule tends to be more cumbersome. This is especially true when you have to factor in overtime pay. Because the pay date isn’t always on the same day, keeping track of hours and overtime for a specific pay period can be difficult.
As a result, many companies choose to keep their hourly employees on a biweekly payroll and reserve the semimonthly schedule for salaried staff.
A semimonthly pay schedule is also trickier when it comes to processing. When pay dates don’t fall on the same day of the week, your payroll processing deadlines will vary considerably. In addition, your pay dates will sometimes fall on holidays and weekends.
If you fail to pay careful attention you could miss a deadline and delay employee paychecks.
When choosing between a biweekly or semimonthly pay schedule, it’s important to consider the decision from the view of the business owner and the employee, then choose the schedule that makes the most sense for everyone.
Regardless of which schedule you choose, make sure you organize your payroll processes around your pay dates so your employees are always paid when they expect to be paid.
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