When deciding your business structure and setting up your payroll, one of the things you’ll have to make up your mind about is your payroll schedule. While some states decide on behalf of her citizens, others give business owners the free will to choose.
There are four typical payroll schedules. They are monthly, semi-monthly, bi-weekly, and weekly. However, the confusion arises with understanding the difference between biweekly and semi-monthly payroll.
Anyone looking at them at first glance would consider them quite similar. But the two payroll methods are not. A bi-weekly payroll schedule is different from a semi-monthly payroll schedule in a lot of ways.
Bi-Weekly Payroll Schedule
Here, payroll to holds on a biweekly basis. In simpler terms, a bi-weekly pay period occurs once every two weeks. Since a year has 52 weeks, a bi-weekly pay period equals 26 paychecks in a year.
There are some months under the biweekly pay period where the employees will receive payment thrice instead of twice. Also, within this period, each paycheck will represent 80 hours of work.
Semi-Monthly Pay Schedule
Companies that operate a semi-monthly payroll schedule pay their employees twice a month. Unlike the bi-weekly payroll schedule, semi-monthly employees receive two paychecks in a month, irrespective of the month’s number of weeks.
Semi-monthly employees also receive higher paychecks when compared to by-weekly employees. But it doesn’t mean that employers pay them more. For example, two employees earn $12,000 per annum. But they are paid under different payroll schedules.
The bi-weekly employee will earn $461.50 per paycheck, but the semi-monthly employee will get $499 each time he receives a salary. This difference in amount is because of the difference in the number of pay periods within the year.
Differences Between Getting Paid Twice in a Month and Getting Paid Every Two Weeks
#1. Pay Period
The significant difference between getting paid twice in a month (semi-monthly) and getting paid every two weeks (bi-weekly) is the pay period. Semi-monthly employees receive paychecks 24 times in a year, but bi-weekly employees receive 26.
The pay dates for a semi-monthly employee are usually on the 15th and final day of the month. But a semi-monthly payroll is not always that easy to predict.
Depending on some factors, they may fall on different days of each month. It could be on a Wednesday, Thursday, Monday, Friday, or any other day of the week.
#2. Salary Processing Differences
Payroll processing for semi-monthly salaried employees differs from payroll processing for biweekly salaried employees. Full semi-weekly salaried employees receive payment for 86.67 hours each pay period.
Bi-weekly employees, on the other hand, receive payment for 80 hours each payday. To be more specific, full-time salaried employees receive a standard compensation for 2080 hours yearly.
An employer that pays biweekly will divide the 2080 hours by 26 pay periods. But to arrive at the number of hours for a semi-monthly employee, he’ll divide 2080 hours by the 24 pay periods.
When considering which payroll is more efficient, the semi-monthly payroll is preferred. The reason is quite apparent; semi-monthly payroll has fewer processing periods.
With semi-monthly payroll, it’s easier to apportion salaries and wages since there’s less need for an end of the month adjustments.
#4. Employee Relations
From the perspective of employee relations, bi-weekly payroll will give the desired result. The employees get accustomed to getting paid twice every month, only to receive two extra paychecks each year. Isn’t that great?
Also, it works better with the employee’s budget when they budget for cash receipts every Friday. Unlike with semi-monthly payroll where payment can be delayed or accelerated by the presence of holidays!
When it comes to organization and how systematically an organization executes its operations, biweekly payroll processing hits the mark.
This is because bi-weekly payroll processing occurs on a specific day week, while semi-monthly processing periods shift around different days of the week.
The Bottom Line
If you can choose a payroll schedule, it will help to have a basic understanding of both plans. Appreciating their differences will help you make an informed decision, so you have no regrets for tomorrow.
When you get paid every two weeks, there is a higher level of consistency for all parties involved. Employees can look forward to payday, and the payroll staff knows when to start tidying up the accounts.
But with a semi-monthly pay schedule, it gets a little complicated. Employees may find it challenging to budget based on an unstable payday, making the entire process more confusing.