A semimonthly would be a great choice for an entrepreneur who wants to put the same amount of money into their payroll each month. The trade-off would be having to make sure that your payroll clerk stays on top of the ever-changing payday. This might mean preparing the cheques or deposits on Friday to make sure they’re ready for Monday.

The end of the month can get awkward if it overlaps two different months, with the beginning of the week in one month and the end of the week in another. In case you are managing a team of 5 or more and looking to boost efficiency, Everhour is the perfect tool to keep your team on track. Don’t worry, you’re not going crazy, you just haven’t fully grasped the semi-monthly vs. bi-weekly payroll debate yet. Lucky for you, we’ve compiled a full guide on what makes these two types of payrolls different.

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In contrast, bi-weekly pay occurs every two weeks, leading to 26 pay periods annually, but with variable payday dates. For obvious reasons, paying your hourly staff biweekly makes it a much easier and less troublesome way to calculate your employee payment amounts. Remember, a semi-monthly payroll requires less processing, as it happens 24 times a year rather than 26 times a year, and so can save the company money. Moreover, calculating the salary for hourly biweekly employees is the easiest payroll process.

Accounting & Auditing

Automated payments are increasingly common for expenses like utilities and subscriptions. Implementing an automated payroll system can help employees manage their finances more effectively by aligning with their automated payment schedules. If payday falls on a holiday or weekend, you will either need to advance or delay payroll, adding another responsibility to your plate. Whether you opt for semi-monthly vs bi-weekly, ensure payday falls on a business day. For semi-monthly schedules, adjust for holidays so employees don’t have to wait unnecessarily for their first paycheck of the month.

Drawbacks of bi-weekly pay

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The extra two paychecks for biweekly pay frequencies can set your business back if you don’t properly prepare for months with three paychecks. You will need to make sure you have enough money in your payroll account to cover the additional expenses. Deciding on a pay frequency for your small business is an important decision. Your pay frequency determines how often you process payroll and when employees receive their paychecks. For example, the employee may receive payment for 12 days during one pay period and 13 days the next.

This article delves into the strengths and weaknesses of semi-monthly vs bi-weekly payroll. By the end, you’ll be able to make an informed decision and choose a payroll schedule that aligns with your business goals and workforce needs. According to the Bureau of Labor Statistics, 43% of businesses in the U.S. use a bi-weekly pay schedule, while 19.8% use semi-monthly payroll.

When you do decide to make a change, you will have to provide employees with a warning, especially if it will reduce the frequency of pay. Some employees might prefer the weekly payroll schedule as they can depend on receiving payment for their work every week. Although your payroll team has a dependable day of the week to process payroll, they also have to do it every week. As a result, they waste more time, and it costs you more money to repeat the payroll process so frequently. Weekly payroll provides a reliable payday where employees can expect to receive their pay. As a result, they feel they have more control over their own money and are less likely to face financial hardship throughout the month.

Differing Pay Periods

This difference in the amounts per paycheck can lead to a variety of impacts on employees’ expenditures. As mentioned above, bi-weekly payroll distributes employee paychecks every other Friday. Paying employees once in two weeks results in 26 pay periods per year.

Understanding whether employees prefer predictable semi-monthly payments or frequent bi-weekly payments can guide your decision. Bimonthly pay may benefit the employees because they can plan for their purchases since most bills have a monthly frequency. Getting two paychecks every month enables you to budget better for basic expenses such as rent and bills, among other expenses. In general, bi-weekly payrolls are used by companies that pay their employees a low to average hourly wage. If your employees punch in and out and work a different amount of hours each week, then a bi-weekly payroll will make more sense. Keep in mind that employees who volunteer to work more hours may be doing so because they need more cash flow that week.

• For example, if an organization pays based on the previous period like the 16th to the end of the month.
• This requires payroll expense accruals, so your accountant can identify costs in the month the additional compensation was paid.
• If payday falls on a holiday or weekend, you will either need to advance or delay payroll, adding another responsibility to your plate.
• This is also the preferred mode of pay for freelancers and contract employees.
• From a pure efficiency standpoint, the main objective of the company is to use these payroll cycles to limit the number of payrolls they have to process.
• It is also possible for employers to change their payday to a different day or change how often they pay their employees.

A biweekly payroll is when a company distributes paychecks every other week on the same day. Bi-weekly payroll systems reduce administrative complexities for hourly employees through easier management of work hours and overtime pay. Semi-monthly payroll streamlines benefit deductions for salaried employees.