Advantages and Disadvantages of Bimonthly Payroll

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Bimonthly payroll refers to the employee payment method, that the company pays its employees once every two months. Employees in bi-monthly pay receive a salary every two months (six times a year).

The following are the Advantages and Disadvantages of the Bi-Monthly Payroll.

Advantages (Pros / Positives / Benefits) of Bimonthly Payroll

Advantages for Employees

1. Paycheck Amount will be Comparatively High

When compared with semi-monthly payroll, the value of the individual payment will be high. Employees receive six paychecks per year in the bi-monthly payroll method.

As an example, if the employee’s annual total payment is $78,000 then,

  • If the employee receives the payment via a bi-monthly method he/she will receive $13,000 per paycheck ($78,000 / 6 pay periods).
  • If the employee receives the payment via a semi-monthly method he/she will receive $3,250 per paycheck ($78,000 / 24 pay periods).

Even though the individual paychecks may be larger, the same total amount will be paid end of the year despite the pay frequency.

2. Promotes More Savings for Employees

Employees receive a paycheck once in two months using the bi-monthly payroll method. This promotes employee savings with a large amount of paycheck received.

3. The Payment Plan and Method are Easy to Understand

The bi-monthly payroll method is very easy to understand. There is only one payment applicable in a given two calendar months. Simply, the payment happens on the last business day of the payroll period (two months). It is simple to understand by an average employee.

Advantages for Employers

4. Easy Payroll Cash Flow Forecasting for Companies

The company finance department and management will have two months to plan the cash flow forecasting to pay salaries/wages on the upcoming payroll. This will be a huge advantage for the companies to utilize receivables more instead of overdrafts.

5. Less Comparative Paper Work Requirement

When compared with semi-monthly pay and bi-weekly pay, there is less paperwork required for bi-monthly pay since there is less number of payrolls to be run per year.

6. Low Expenses and Processing Time in Payroll Run Administration

Whether the company is administrating the payroll in-house or outsourcing, the bi-monthly payment will incur fewer expenses in the payroll run, since there are only 6 pay periods in a year. In comparison, the bi-weekly method has 26 pay periods and the semi-monthly method has 24 pay periods. This will result in lower annual payroll management expenses for companies that use bimonthly pay frequency.

The company’s Finance and HR departments consume less effort/time on leave administration, overtime calculation, and pay processing administrative tasks.

Disadvantages (Cons / Negatives / Drawbacks) of Bimonthly Payroll

Disadvantages for Employees

1. Difficulty in Personal Budgeting

Some people are used to monthly budgeting like getting the monthly salary and dividing that by month-based payments like rental, utilities, gas, etc. In these cases, such employees may feel difficulties in personal budgeting when bi-monthly payment is there and they receive one payment only in two months.

2. New Employees Have To Wait Around 2 Months to Receive the First Paycheck

Unlike the weekly payroll method which pays employees every week, the bi-monthly payment happens around 2 months. The newly joined employee has to wait for around 2 months if he/she joins at the beginning of the month.

3. Inconsistent Payday

Payday of the bi-monthly method may occur on the same date each two months basis (ex. 30th) but not on the same day in the week. For some people, it could be challenging if they used to get the income on a specific day in a week.

4. Employees’ Motivation May Decrease

Employees have to wait for two months to receive the returns of what they have worked on. This will decrease the motivation of employees since they receive payments only for a quite larger duration.

5. Paycheck is Less Frequent

In the bi-monthly method, employees should wait for 2 months to get their paycheck. This means the employee will only get six paychecks throughout the year. This will be difficult for employees to manage their expenses with less frequent paychecks.

Disadvantages for Employers

6. Not Practical to Implement with Non-Exempt Employees.

Non-exempt employees are entitled to a minimum amount of compensation and on top, they will be entitled to overtime pay when they work more than agreed hours per week. It is not practical to implement bi-monthly payroll with non-exempt employees since the overtime payment will happen only in two months. Non-exempt employees will not like to wait that much time to receive the overtime payment.

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