Semimonthly vs Biweekly Payroll Schedules 2020

semimonthly vs biweekly

A lot of people may be confused between semimonthly and biweekly pay since employees receive two payments monthly. But there are a lot of things you need to know about these two pay periods. Employers can divide an employee’s salary by 26, or the number of yearly paydays. Typically, biweekly paydays happen on the same day of the week but not the same date.

The taxes taken out of each paycheck will be different for weekly, biweekly, and monthly pay periods, but the overall amount ends up the same. In general, bookkeeping for biweekly paychecks can be complicated with the addition of the extra two paychecks during the year. The reason why is because it makes it harder to predict future cash flow. Semimonthly pay may be included with other forms of payroll to meet the needs of the organization and employees effectively.

Semi-Monthly vs Bi-Weekly Payroll

That doesn’t mean, however, that you can’t pay your employees more frequently; the time frame that State law specifies serves as a minimum. If your place of work mainly consists of hourly employees, then operating a bi-weekly payroll will be less of a burden on those who run payroll. A bi-weekly pay schedule also means consistency in the days of the week you are paid, which can make certain financial situations a little bit easier. A bi-weekly pay schedule usually means your paycheck comes every other Friday (or whatever day of the week your payroll is issued).

What is the difference between bimonthly and semimonthly?

Remember, bimonthly may mean occurring twice a month or occurring every two months, semimonthly only means occurring twice a month. Help Us Improve!

You will be able to know the amount needs to be paid out with each payroll period by dividing the amount agreed upon by 24. Horizons manages payroll on behalf of companies in more than 180 countries and regions. Our ability to centralize and coordinate global payroll cycles allows you to streamline your international payroll, ensuring accuracy in payment and full compliance with local laws.

Attendance Tracking

Also, your payroll clerk will be able to keep a consistent schedule and pace with how they distribute them. The one downside to biweekly payments is the inconsistency in how much money you are paying out each month. There will always be a couple of months where you will have three paydays instead of two. It will be up to you and your accountant to make sure you will have enough to cover the extra payout. The lack of consistency with semimonthly payroll can also be a turnoff for some businesses and employees. Since payroll will be processed on a different day of the week, the person running payroll could lose track of that responsibility.

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The prefix “bi” means two, so it’s a one-word way of saying two weeks. The issue with semimonthly pay is that it can get a bit complicated for hourly workers. As the number of days in a month varies, how much pay you get will also change. The number of days in the last half of the month will usually either be 15 or 16. When it comes to the way that your company handles payroll, you might find that there are various options available for you. State law will typically specify the time frame within which employees must legally get paid.

Processing of Payroll on a Hourly Basis

It can prove to be demotivating for the employees who have to spend hours together on their job to earn the money necessary to meet their various expenses. It is prudent to understand here that whether a salaried employee is paid biweekly and semi-monthly, it will leave no impact on the annual pay drawn by you. Regardless of the payment schedule, the employee will get the same amount annually. The only thing that matters here is the amount in the check and how frequently you get the same. If you’re running any sort of business that employs people, an aspect that begs your attention is the pay frequency for your employees. There are two commonly used pay schedules – semi-monthly and bi-monthly.

semimonthly vs biweekly

One point of consideration is how many employees you have and if those employees are paid hourly or salaried. Running a semimonthly payroll for hourly employees is more difficult and confusing than doing so for salaried employees, especially when workers earn overtime pay. With a semimonthly payment schedule, employees always receive two paychecks each month. However, there are two months in the year where employees who are paid bi-weekly receive three paychecks in a month. So, companies that use bi-weekly pay schedules give 26 paychecks per year while companies that rub payroll with a semimonthly frequency give 24 paychecks per year to their employees.

What is Biweekly Pay?

You need to be attentive to the money in your payroll account to prevent future problems. If your business didn’t prepare for the months that result in three paychecks, it could be very hard to budget later on. In a monthly pay schedule, payroll is processed 12 times a year on a fixed recurring date. Though it is the most cost-effective option for employers, employees are forced to wait a whole month to receive each pay check. An exploration into some of the key differences between a bi-weekly and a semi-monthly payroll schedule. The inconsistency of semi-monthly payroll is an issue for some companies as well as employees.

  • Handling the payroll for biweekly salaried employees and semi-monthly salaried employees presents a difference in how they are processed.
  • The process of processing pay for biweekly salaried employees is different from the process for semimonthly salaried staff.
  • Biweekly, or more rarely fortnightly, means every two weeks, which works out to 26 paychecks per year.
  • Before finalizing the payroll schedule that best suits you, you may also consider some other types of payroll schedules.
  • On the other hand, only 19.8% of employees are paid using the semimonthly payroll frequency.

Hopefully, by understanding each option, you can choose the right payment schedule for your small business. Bi-weekly pay is calculated by dividing an employee’s gross annual salary by 26. For example, an employee with a fixed salary of $50,000 will earn $1,923.08 on a  bi-weekly basis.

It should be avoided as much as possible to prevent such mistakes from happening. This is a common misconception, but no—because some months have more than four weeks, a bi-weekly and semi-monthly payroll sparknotes frequency aren’t quite the same. If you have 10 employees who each earn $1,500 in gross wages per paycheck, you’ll need to have an additional $15,000 on hand both months that have three paychecks in them.

Should I pay biweekly or monthly?

When you make biweekly payments, you could save more money on interest and pay your mortgage down faster than you would by making payments once a month. When you decide to make biweekly payments instead of monthly payments, you're using the yearly calendar to your benefit.