Semi-monthly payment of wages refers to a payment schedule that includes being paid twice in a month. It is a different form of payment method from the bi-weekly, monthly and hourly methods. It is commonly confused with the bi-monthly payment method. Although the two methods may appear to be similar they are very different from each other.
The semi-monthly payment method comprises 24 payment periods in a calendar year whereas the bi-weekly payment method comprises 26 payment periods in a calendar year. This makes the semi-monthly paycheck bigger as compared to the bi-weekly paycheck because with the bi-weekly payments the same amount of annual income is divided over two extra paychecks.
So among the four methods of being paid, which one is better? The answer may vary from person to person. The monthly paychecks bring a degree of certainty and uniformity to the payments.
They add predictability to the monthly income and therefore the employees can plan their expenditures beforehand. Monthly paychecks are also easier to manage for the organizations. Payroll service providers do not need to go out of their way to adjust the monthly paychecks.
Biweekly and semimonthly payment methods on the other hand are different. Biweekly paychecks also carry certainty and allow the workers to plan their expenditures beforehand. Semi monthly expenditures however are a bit on the uncertain side.
Semi monthly paychecks are paid out twice each month, which is why there are 24 paychecks in a calendar year. These paychecks do not carry the same degree of certainty as monthly or biweekly paychecks because the number of days in a month varies.
- February has two pay periods having 15 and 14 days and when it falls in a leap year then the second pay period has 13 days.
- Months with 30 days have two pay periods of 15 days each.
- Months with 31 days have two pay periods of 15 and 16 days.
The table shown below has the details of the semi-monthly pay periods for the year 2021. Most companies have the policy of paying their employees within 2 days after the wages become due, so for instance if the payment of the 1st pay period of January becomes due on 15th, the company can pay it out from 16th to 18th.
|Semi-monthly Pay Periods for 2021|
|Month||1st Pay Period||2nd Pay Period|
|January||1st – 15th||16th – 31st|
|February||1st – 15th||16th – 28th (13 days)|
|March||1st – 15th||16th – 31st|
|April||1st – 15th||16th – 30th|
|May||1st – 15th||16th – 31st|
|June||1st – 15th||16th – 30th|
|July||1st – 15th||16th – 31st|
|August||1st – 15th||16th – 31st|
|September||1st – 15th||16th – 30th|
|October||1st – 15th||16th – 31st|
|November||1st – 15th||16th – 30th|
|December||1st – 15th||16th – 31st|
It can be seen that the payment of paychecks varies each time. The first pay period of each month is of 15 days so if the company policy is to pay the paycheck one day after it becomes due, the workers should expect to be paid for the first paycheck on the 16th.
The second paycheck will vary for each month. This variance however is not too great to cause any serious timing issues for the workers, however, the variation in days may create issues if any employee has set up a direct deposit to be paid out on specific dates.
For the organization, both bi-weekly and semi-monthly paychecks are more difficult to manage as compared to the monthly paychecks. First of all, the payroll service provider or payroll keeper is likely to charge a higher amount for the payroll servicing costs.
Secondly, the payroll keeper will have to adjust the biweekly and semimonthly systems with monthly systems when it comes to deductions and benefits, as state laws and regulations usually require such deductions and benefits to be reported on a monthly basis. So converting them from biweekly or semi-monthly to monthly requires extra time and work.
In addition to this the payroll keepers are usually required to calculate the hourly rates for the semi monthly payment systems as well because calculating the wages through the hourly rates makes the computation in certain cases much easier.
Is getting paid semi monthly good?
There is no straight answer to this. For a small business running a semi-monthly payroll may be more expensive as compared to monthly payroll.
For the employees, semi-monthly payment is better than monthly payment because they can get access to their wages more frequently, thereby increasing their liquidity and allowing them to carry out expenditures and purchases without waiting for the new month to begin.