# What is Bi-Weekly 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.

## How does Bi-Weekly Pay Schedule Works

1. Pay Periods: In a biweekly payroll system, there are 26 pay periods in a year, as there are 52 weeks in a year divided by 2.
2. Payroll Processing: Employers typically establish a payroll schedule, specifying the pay period start and end dates, as well as the payday. For example, if the pay period starts on a Monday and ends on a Sunday, payday might be the following Friday.
3. Hours Worked: Throughout the pay period (two weeks), employees track their hours worked. This tracking could happen through manual time-sheets or electronic time-tracking systems.
4. Calculating Wages: The employer calculates each employee’s wages based on their hourly rate or salary at the end of each pay period, while considering any overtime hours worked as applicable.
5. Deductions: Various deductions are then subtracted from the gross pay, including taxes, insurance premiums, retirement contributions, and any other withholding required by law or agreed upon with the employee.
6. Net Pay: The resulting amount after deductions is the employee’s net pay. This is the amount they will receive in their paycheck.
7. Payment Distribution: Employees may receive their pay through direct deposit into their bank accounts, physical checks, or electronic pay cards, depending on the employer’s payment method.
8. Taxes and Withholding: Employers are responsible for withholding federal, state, and local income taxes from employees’ paychecks, as well as Social Security and Medicare taxes. The amount withheld depends on various factors such as the employee’s filing status, allowances claimed, and any additional withholding requested by the employee.
9. Record Keeping and Reporting: Employers must maintain accurate records of each pay period, including hours worked, wages paid, and deductions made. They also need to file payroll tax returns and provide employees with pay stubs detailing earnings and deductions.

## Example of Biweekly Payroll Calculation

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 bi-weekly payday.

• For 10 months in the year, the employee will get \$6,000 each month (2 Pay Days per month hence \$3,000 X 2 = \$6,000).
• For 2 months in the 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.

## Bi-Weekly Payroll Calendar for 2024, 2025, & 2026 Years

• Bi-weekly pay schedule (payroll calendar) for the Year 2024 with Friday as the payday:
• Bi-weekly pay schedule (payroll calendar) for the Year 2025 with Friday as the payday:
• Bi-weekly pay schedule (payroll calendar) for the Year 2026 with Friday as the payday:

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 Employer

• Easier administration and processing: Employee time entry verification is easy on bi-weekly schedule 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.
• Reduced administrative costs: Processing payroll biweekly instead of weekly can reduce administrative expenses associated with payroll processing. Costs like payroll software, finance staff time, paper wastage can be reduced.
• Streamlined payroll processing: Payroll department prefers bi-weekly schedule 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 due to the predictable and regular rhythm for payroll processing.
• Enhanced cash flow management: Bi-weekly pay schedules allow for better alignment of payroll expenses with revenue cycles. This helps employers manage cash flow more effectively.
• Compliance with labor laws: Bi-weekly pay schedules help ensure compliance with labor laws regarding timely payment of wages, as employees are paid on a regular and consistent basis.
• Improved employee satisfaction: Bi-weekly pay schedules provide employees with a predictable and reliable source of income, which can contribute to higher job satisfaction and morale.

## Benefits of Biweekly Payroll as an Employee

• Easier in budgeting: 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.
• Receive extra two paychecks: Employees receive “extra” paychecks for two months each year with bi-weekly payroll. This can be treated as a bonus if they manage well.
• Overtime limits covers two weeks: The overtime limits per pay period would cover both weeks instead of just one, for employers using the biweekly pay period. This is another advantage for employees who can plan and cover more overtime.
• Synchronization with bills: Biweekly pay schedules can align more closely with monthly bills and expenses, facilitating easier budgeting and financial planning.
• Increased convenience: Some employees may find biweekly pay schedules more convenient, as they only need to review and manage their paychecks every two weeks instead of weekly.

## Drawbacks / Challenges of Biweekly Payroll as an Employer

• Increased risk of paycheck errors: There is a higher risk of errors in paycheck calculations with the longer pay periods. This can lead to employee dissatisfaction and potential legal issues.
• Potential for cash flow strain: Biweekly pay schedules may result in larger payroll expenses every two weeks, which could strain cash flow if not managed properly.
• Challenges with timing: Biweekly pay schedules may not align well with certain business expenses or billing cycles. Hence employers has to plan accordingly to ensure sufficient funds are available for payroll.
• Less frequent rewards: Employees may perceive biweekly pay as less rewarding compared to weekly pay. This could impact morale and motivation in some cases, which affects the employers.
• Impact on hourly workers: For hourly paid employees, fluctuations in work hours between pay periods could result in variability in paycheck amounts. This will lead to a potential financial instability for some employees.

## Drawbacks / Challenges of Biweekly Payroll as an Employee

• Longer pay periods: There is a longer intervals between paychecks compared to weekly schedules. This could pose challenges for employees who rely on more frequent income to cover expenses.
• Budgeting challenges: Some employees may find it more difficult to budget with a biweekly pay schedule compared with the weekly paychecks.
• Cash flow gaps: Longer pay periods may result in cash flow gaps for employees living paycheck to paycheck. Employees could be challenged with the unexpected expenses arise between paydays.
• Less frequent rewards: Employees may feel less rewarded or motivated without the immediate gratification of weekly paychecks. This could impact morale and job satisfaction.
• Potential for paycheck errors: There is a higher risk of errors in paycheck calculations with longer pay periods. This can lead to frustration and financial strain for employees.

## Does Bi-weekly Pay Schedule Affect Taxes?

1. Withholding amounts: Biweekly paychecks may result in different withholding amounts compared to other pay schedules like as monthly or semi-monthly. This is because the withholding calculations are based on the assumption of a consistent pay frequency throughout the year. With biweekly pay, each paycheck may appear smaller which can result in lower withholding amounts per paycheck.
2. Tax brackets: Biweekly pay may cause some employees to fall into different tax brackets compared to other pay frequencies. The distribution of income across pay periods can affect the effective tax rate applied to each paycheck while the tax brackets themselves are based on annual income. Employees who receive biweekly pay may experience slight fluctuations in their effective tax rate compared to those on other pay frequencies.
3. Annual reconciliation: Employees must reconcile their total income and tax withholdings when filing their tax returns at the end of the tax year, regardless of pay frequency. This means that any differences in withholding amounts or tax brackets throughout the year due to biweekly pay will be accounted for during the tax filing process. Employees may receive a tax refund if they overpaid taxes throughout the year or owe additional taxes if they underpaid.

## Other Types of Payroll Schedules (Methods) Available

1. Bi-Monthly Payroll Schedule

## How to Choose the Best Payroll Schedule for My Company?

1. Assess your cash flow: You have to consider your company’s financial situation and determine how frequently you can afford to pay your employees. A more frequent payroll schedule, such as weekly or bi-weekly, may require a more consistent cash flow compared to a monthly or semi-monthly schedule.
2. Consider employee preferences: You have to consider the preferences of your employees when choosing a payroll schedule. Some may prefer more frequent paychecks to better manage their finances, while others may prefer less frequent paychecks if they are used to monthly budgeting.
3. Evaluate administrative efficiency: Consider the administrative workload involved in processing payroll. A more frequent payroll schedule may require more time and resources for payroll processing, whereas a less frequent schedule may be more efficient administratively.
4. Review legal requirements: Make sure to comply with federal, state, and local labor laws regarding payroll frequency. Some jurisdictions may have specific requirements regarding the minimum frequency of paychecks. As example, in the United States, payroll schedules must comply with federal, state, and local labor laws
5. Test different schedules: You can consider testing different payroll schedules on a trial basis to see which one works best for your company and employees, if possible. This can help you assess the impact on cash flow, administrative efficiency, and employee satisfaction.
6. Consult with professionals: Consider consulting with payroll experts or financial advisors who can provide insights and recommendations based on your company’s specific needs and circumstances.