The semi-monthly payment method is one payment method among the different payment methods that exist. Organizations pay their employees on the basis of these payment methods. It is common for an organization to have employees with the different basics of payments on the company payroll.
Although the decision to decide the method through which the employees are to be paid depends upon the executive and senior management of the company. There are however certain instances where the organizations become bound to follow the laws set by the state.
Can hourly employees be paid semi-monthly?
Before we can answer this question, let us break it down into smaller parts to understand it better.
What is a semi-monthly payment?
Semi monthly payment basis is one where the employees are paid twice every month. This means that in one year, an employee who gets paid on the semi annual basis receives 24 paychecks.
Paychecks to employees on semi monthly payment are given out after every 15 days roughly, depending on the number of days in a month.
- A 29 day month will have 2 pay periods of 14 and 15 days each.
- A 30 day month will have 2 pay periods of 15 days each.
- A 31 day month will have 2 pay periods of 15 and 16 days each.
If an organization decides to pay semi monthly wages then this decision will affect the benefits and deductions as well and the payroll keeper will have to make adjustments to make sure that the monthly deductions and benefits map on to the semi monthly payment system.
What is hourly payment?
Hourly payment basis is one where the employees are paid on the number of hours worked, on a weekly basis, at a predetermined hourly wage rate.
For instance, if a worker is paid $20 per hour and the worker clocks 6 hours per day for 5 working days, then the gross weekly pay of that work would be $600.
Can the hourly employees be paid on a semi monthly basis?
Although this sounds like a simple question, it is not a simple one in reality. Why though? After all the employee will be paid for the work they do, so why is the answer to this question not simple?
The reason is that when we move across payment methods, the size of paycheck, deductions and benefits changes. Therefore in order to protect the interests of workers, governments regulate how organizations pay their workers.
These regulations may change with jurisdiction but generally most local or state governments have defined a minimum frequency criteria which the organizations must adhere to. The organizations can go beyond this criteria but not under it
- Weekly employees must be paid at least 52 times per year
- Bi-weekly employees must be paid at least 26 times per year
- Semi-monthly employees must be paid at least 24 times per year
- Monthly employees must be paid at least 12 times per year
What this means is that an employee registered as an hourly employee must be paid at least 52 times in a year, the organization can pay more than this frequency level but 52 is the minimum number of times that an hourly employee must be paid by an organization.
Therefore an employee working on an hourly basis cannot be paid on a semi-monthly basis, if the state has the minimum pay period for hourly workers at 52 times per year.
If the state laws and regulations allow hourly employees to be paid on a semi monthly basis then, the payroll keeper will have to make sure that they convert the hours worked to reflect the semi monthly pay period.
For instance as stated above, the number of days in a pay period in a semi monthly payment system varies. So the payroll keeper must take into consideration the number of days in a pay period and adjust the payment accordingly.
It is not going to be a uniform payment as the payment periods may contain 13,14,15 or 16 days. The hours worked must be appropriately multiplied by the number of days applicable because unlike monthly or semi-monthly employees, hourly employees do not get charged for weekends.
This means that if the state laws allow hourly employees to be paid on a semi monthly basis, it will make the payroll keepers job more difficult.
So the bottom line is that if the state laws have the minimum annual payout for hourly employees as 52 then the hourly employees cannot be paid semi-monthly, if however, the minimum payout for the hourly workers is 24 or less then they can be paid on a semi-monthly basis.