As an employee, the frequency of payroll directly impacts your budget and living conditions. Every company has a unique payroll structure. As a result, it’s essential to know your organization’s payroll cycle and how it works.
Most employers choose to pay their employees on a weekly, biweekly, semi-monthly, or monthly basis. Employees in the semi-monthly category receive their payment twice a month, usually on the 15th and on the last day of each month.
Unlike the bi-weekly payroll schedule, which has 26 payments in a year, a semi-monthly payroll schedule has just 24 pay periods. As you would expect, this affects the size of the employee’s paycheck.
It can also lead to other factors such as calculating overtime, benefit deductions, and the likes.
What is a Payroll Schedule?
A payroll schedule is a document that shows both your pay period and your pay date. As the name implies, your pay period is the time frame you’ve worked for and expect payment.
Your pay date, on the other hand, is the day you get paid for work done. Sometimes a time lag might occur between the pay period and pay date. This time lag is called “payment in arrears.”
For example, if your pay period ends on a Tuesday, but the accountant pays out the check on a Thursday, a time lag just occurred. This delay occurs majorly with hourly employees because time is required to collect the number of hours worked and process payroll.
Types of Pay Schedule
There are four most common types of payroll schedules. They include;
Let’s consider them in a bit more detail.
Weekly: Here, payment is made every week and on a specific day of the week. It has the most pay periods with 52 payrolls in a year. However, because this schedule is computed every week, it is the most expensive to operate.
Bi-weekly: As the name implies, the company makes payment every two weeks, and It consists of 26 pay periods per annum. The bi-weekly pay schedule is the most widely adopted payroll schedule.
Semi-monthly: Employees receive their wages two times in a month on two specific dates. With semi-monthly employees, the payroll officer works on the payroll 24 times in a year.
Monthly: Here, employers pay their staff salaries every month, and the pay period is 12 times in a year.
How to Calculate Semi-Monthly Payroll?
We can calculate a semi-monthly payroll in several ways and from several perspectives. You can determine it based on your annual salary, your bi-weekly salary, and your daily rate.
How to determine semi-monthly pay from your annual salary
A semi-monthly payroll is processed twenty-four times a year. So to calculate the gross amount of your semi-monthly pay, divide your annual salary by 24.
It doesn’t get any more complicated than this. For example, if you earn a gross yearly income of $144,000, your semi-monthly pay will be $6000.
How to calculate your semi-monthly pay from your Bi-weekly salary
When transitioning from a biweekly pay schedule to a semi-monthly pay schedule, your gross income per check will increase. To calculate what the exact amount will be, divide your annual salary by 24.
You can also calculate it following this method:
Multiply your biweekly pay by 26 to get your yearly income. You’ll then divide your annual salary by 24 to get your semi-monthly payment.
How to determine your daily rate as a semi-monthly employee
Determining the daily rate for a semi-monthly employee can get a little complicated. Employees do not always work from the beginning of the month to the end of the month.
Also, a company might bill an employee’s time to an external client or an internal account. These reasons make it all the more important to know your daily rate as an employee.
Here’s how to go about it;
Divide your gross semi-monthly pay for a pay period by the total number of days within that period.
For example, a semi-monthly gross payment of $4,000 will equate to a daily rate of $266.67 within a 15 day pay period.
How to Treat Benefit Deductions
Most voluntary employee deductions are calculated monthly. Some of these deductions include health care coverage, life insurance premiums, payment for work-related items, and the likes.
The migration from a biweekly to a semi-monthly will require a reassessment of when the payroll officer makes these deductions.
It might require dividing the annual premium by 24, so the respective deductions will align with the pay periods.