What is Biweekly Payroll? Explanation with Examples
What is Biweekly Payroll?
Biweekly payroll is when employees receive their pay every other week on an agreed day. There are 26 payments applicable for bi-weekly payroll, usually twice a month.
The entire year will be split into 26 separate pay periods in a biweekly schedule. Hence the employees get paid every two weeks instead of every week. In some months, the employees will get paid three times in one month with the payment schedule. There are always two months each year in which three paychecks are distributed and the other 10 months have two paychecks distributed.
Biweekly pay is the common pay period that many employers use in the USA and other countries.
Pay Period & Pay Days of Biweekly Payroll
Biweekly pay is when an employer pays the employees every other week on a specific day of the week. Biweekly pay contains 26 pay periods per year (Every calendar year has 52 weeks, hence 52/2 = 26).
An employer chooses a specific day to pay employees in a biweekly schedule. The most common payday is Friday.
Example of Biweekly Payroll
As an example, let’s assume that an employee joined at an annual salary of $78,000. There are 26 pay periods of biweekly payroll. Hence for each pay, the employee will get $3,000 ($78,000 / 26). The employee’s paysheet will indicate the gross salary of $3,000 on each biweekly payday.
For 10 months per year, the employee will get $6,000 each month (2 Pay Days per month hence $3,000 X 2 = $6,000).
For 2 months per year, the employee will get $9,000 each month (3 Pay Days per month hence $3,000 X 3 = $9,000).
For hourly employees, the amount they get per pay period varies with the number of hours worked and overtime calculation.
Does Biweekly Payroll Most Popular in the US?
According to the U.S. Bureau of Labor Statistics, biweekly payroll is the most popular in the USA with an estimated 43% of U.S. private establishments paying their employees.
Usually, bi-weekly payroll applies to non-exempt employees, casual hourlies, and undergraduate and graduate student workers.
Most companies in the USA choose a combination of payrolls, using the semimonthly approach for fixed salaried employees and a biweekly payroll for hourly employees.
Pay Frequency Requirements in the US?
According to CPA Practice Advisor, there are no pay frequency requirements at the American federal level. But some U.S. states have specific pay frequency requirements as following examples,
In New Hampshire, employers must pay employees wages on a weekly or bi-weekly schedule. Semi-monthly and monthly pay frequencies must be approved by the New Hampshire Department of Labor (NHDOL).
In California and Michigan, the frequency of pay depends on the occupation. In California, wages must be paid at least twice during each calendar month on the days designated as paydays (with some exceptions).
Benefits of Biweekly Payroll as an Employee
- Employees can easily budget with biweekly payroll. Paydays are more consistent which are paid on a specific day every other week. Other types of pay periods can lead to getting paid on different days of the week.
- With bi-weekly payroll, employees receive “extra” paychecks for two months each year. This can be treated as a bonus if they manage well.
- For employers using the biweekly pay period, the overtime limits per pay period would cover both weeks instead of just one. This is another advantage for employees who can plan and cover more overtime.
- Employees become used to getting the payment twice each month and then receiving two extra payments each year.
Benefits of Biweekly Payroll as an Employer
- Biweekly payroll is easier to administrate and process. Employee time entry verification is easy because it is with a set duration of two weeks. The company does the payroll processing every two weeks instead of one, which makes this more efficient.
- HR department prefers biweekly payroll since the processing steps consistently take place on the same day of each week. It is easier to plan and consistently do the administration work as a routine.
- Bi-Weekly Payroll
- Bi-Monthly Payroll
- Semi-Monthly Payroll
- Differences of Payroll Methods