Bi-Weekly vs Semi-Monthly vs Bi-Monthly Payroll – Difference

Differences between Bi-Weekly Payroll, Semi-Monthly Payroll, and Bi-Monthly Payroll

Differences between Biweekly Payroll, Semimonthly Payroll, and Bimonthly Payroll are explained in the below table,

	Bi-Weekly Payroll	Semi-Monthly Payroll	Bi-Monthly Payroll
Pay Period	Every Other Week	Twice A Month	Once Every Two Months
Number of Payments Per Year	26	24	12
Number of Payments Per Month	For 10 Months 2, For 2 Months 3	2 Payments Per Month	1 Payment Per 2 Months
Payment Usually Happens on a Specific Day of a Week	Yes	No	No
Practical for Non-Exempt Employee Payment	Yes	No / Difficult	No / Difficult
Payment Amount Per Pay Period As Example. Assumption: Annual Salary of $78,000	$78,000 / 26 = $3,000	$78,000 / 24 = $3,250	$78,000 / 12 = $6,500
Best Advantage As an Employee	Employees Feel More Consistent	Payment Method is Easy to Understand	Paycheck Amount will be Comparatively High
Biggest Disadvantage As an Employee	Paycheck will be Comparatively Less	Not Practical with Non-Exempt Employees	Difficulty in Personal Budgeting

_{Biweekly vs Semimonthly vs Bimonthly Payroll}

Differences between Biweekly Payroll, Semimonthly Payroll, and Bimonthly Payroll are explained in the below points,

1. The three payroll method has different pay periods as follows,

Biweekly payroll: every other week
Semimonthly payroll: twice a month
Bimonthly payroll: once every two months

2. Each payroll method has a different number of payments per year as follows,

Biweekly payroll: 26
Semimonthly payroll: 24
Bimonthly payroll: 12

3. Each payroll method has a different number of payments per month as follows,

Biweekly payroll: for 10 months 2, for 2 months 3
Semimonthly payroll: 2 payments per month
Bimonthly payroll: 1 payment per 2 months

4. Payment usually happens on specific or different days in a week as follows,

Biweekly payroll: specific day of a week
Semimonthly payroll: different days of a week
Bimonthly payroll: different days of a week

5. Some of the payroll methods are practical to use for non-exempt employee payments as follows,

Biweekly payroll: can be used for non-exempt employee payment
Semimonthly payroll: difficult to use for non-exempt employee payment
Bimonthly payroll: different difficult to use for non-exempt employee payment

6. Calculation of the payment amount per pay period differs in each payroll method. As an example, let’s assume if an employee’s annual salary is $78,000,

Biweekly payroll: $78,000 / 26 = $3,000
Semimonthly payroll: $78,000 / 24 = $3,250
Bimonthly payroll: $78,000 / 12 = $6,500

7. Following are the best advantage for an employee in each payroll method,

Biweekly payroll: employees feel more consistent
Semimonthly payroll: payment method is easy to understand
Bimonthly payroll: paycheck amount will be comparatively high

8. Following are the biggest disadvantage for an employee in each payroll method,

Biweekly payroll: paycheck will be comparatively less
Semimonthly payroll: not practical with non-exempt employees
Bimonthly payroll: difficulty in personal budgeting

What Industries use Bi-Weekly, Semi-Monthly, and Bi-Monthly Pay Frequencies?

Bi-Weekly Pay Frequency
- Industries with hourly or shift-based work, such as retail, hospitality, and manufacturing, often use bi-weekly pay schedules. This frequency aligns well with these industries’ pay periods and allows for straightforward tracking of hours worked.
Semi-Monthly Pay Frequency
- Semi-monthly pay schedules are common in industries with salaried employees, such as professional services, finance, and education. These industries often have employees with fixed monthly salaries, making semi-monthly pay periods convenient for consistent pay distribution.
Bi-Monthly Pay Frequency
- Bi-monthly pay schedules may be more prevalent in industries with unique pay structures or specific payroll preferences. While less common overall, some government agencies, non-profit organizations, or small businesses may opt for bi-monthly pay schedules due to their simplicity or alignment with funding cycles.

What is Bi-Weekly 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.

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.

What is Semi-Monthly Payroll?

Semi-monthly payroll is when a business pays the employees twice a month, usually on the 15th and last day of the month. The payment generally happens out on the proceeding Friday if these dates fall on a weekend. Furthermore, employees’ annual salaries are split into 24 pay periods, results 24 equal payments throughout the year.

What is Bi-Monthly Payroll?

Bimonthly payroll means 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).

As an example, let’s assume that an employee joined at an annual salary of $60,000. There are 6 pay periods of bimonthly payroll. Hence for each pay, the employee will get $10,000 ($60,000 / 6). The employee’s pay-sheet will indicate the gross salary of $10,000 on each bi-monthly payday.

What is the Most Popular Pay Schedule 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. The second most popular is weekly payroll with 27%. Third and forth most popular are Semi-Monthly and Monthly pay schedules with 19.8% and 10.3%.

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).

How to Choose the Best Payroll Schedule for My Company?

Choosing the best payroll schedule for your company depends on various factors including your company’s cash flow, the frequency of your employees’ pay, administrative efficiency, and employee preferences. Here are some steps and tips to help you choose the most suitable payroll schedule,

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.
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.
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.
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
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.
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.

Ultimately, the best payroll schedule for your company will depend on a combination of factors, and it’s important to weigh these factors carefully to make an informed decision that meets the needs of both your company and your employees.

Best Practices for Managing Payroll Periods

Here are some payroll period best practices to follow,

Consistency: You should maintain a regular and consistent payroll schedule to provide predictability for employees.
Compliance: You have to ensure compliance with federal, state, and local laws regarding pay frequency, overtime pay, and tax withholding.
Accurate Record-Keeping: You have to maintain accurate records of hours worked, wages paid, and deductions to facilitate payroll processing.
Communication: You should clearly communicate payroll schedules, pay rates, deductions, and any changes to employees in advance to avoid confusion and ensure transparency.
Automation: It is great if you can utilize payroll software or systems to automate payroll processing, reduce errors, and increase efficiency.
Review and Audit: You have to regularly review and audit payroll processes and records to identify and correct any errors or discrepancies promptly.
Employee Self-Service: It is a good practice if you can provide employees with access to self-service tools or portals to view their pay stubs, update personal information, and access relevant payroll documents.
Training and Education: You have to train payroll staff and managers on relevant laws, regulations, and best practices to ensure compliance and accuracy in payroll processing.
Vendor Management: If you are outsourcing payroll, carefully select and manage payroll service providers to ensure reliability, security, and compliance with legal requirements.
Feedback and Improvement: You can obtain solicit feedback from employees and stakeholders to identify areas for improvement in payroll processes and address any concerns or issues promptly.

Advantages of Bi-Weekly Payrolls

1. Employees Feel More Consistent

A bi-weekly pay schedule pays employees every two-week basis. Employees will know the payment will happen on the same day (e.x. Friday) every other week. This is pretty much consistent for the employees when compared with semi-monthly payment, which payment happens every month but the date will be different.

Employees can better consider how much they need to spend on routine household expenses like groceries, food, and gas for the coming two weeks. Bi-weekly payroll will help the employees to plan and manage the expenses & savings for the next two weeks easily.

2. Employees will Receive More Paychecks

The employees get a paycheck every two weeks basis in bi-weekly pay. Every calendar year has 52 weeks, hence there are 26 paychecks received for an employee on each year in bi-weekly payroll (52/2 = 26).

But in semi-monthly pay, the number of paychecks received is 24 (there are two payments applicable in each month, hence 2 x 12 = 24).

The employee will receive more paychecks in bi-weekly payments, even though the yearly total amount is the same. The employee will feel comfortable planning the expenses and saving money using the additional two paychecks received.

Employees can plan and avoid late charges with the more paychecks received.

3. Good Overtime Limit Coverage

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.

4. Easy Overtime Payment Calculation

In biweekly payroll, employee time entry verification for overtime calculation is easy because it is with a set duration of two weeks. When compared with the semi-monthly payroll which the time entry verification happens in the mid of the week (without a set duration), it is quite easy with biweekly payroll to handle the overtime payment-related calculation.

As an example, if semi-monthly payroll is used and employee overtime hours fall between two different pay periods, the company should make adjustments that are complex to manage.

5. Increase in Payroll Processing Efficiency

The company does the payroll processing every two weeks instead of one, which makes this more efficient. The HR department does the payroll processing steps consistently on the same day of each week. It is easier to plan and manage the administration work as a routine.

Disadvantages of Biweekly Payroll

1. Paycheck will be Comparatively Less

When compared with bi-weekly payroll, the value of the individual payment will be less. Employees receive two extra paychecks per year (26 – 24) as an opposite for this.

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

If the employee receives the payment via a bi-weekly method he/she will receive $3,000 per paycheck ($78,000 / 26 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).

2. 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-weekly payment is there.

3. Promotes More Spending for Employees

Bi-weekly payments could encourage more spending for certain employees. As an example, the employee will feel that they will get the next payment in two weeks, hence rather than planning to save, the mindset could shift to spend more. This means the employee gets the payment on more frequent occasions hence unable to plan the savings properly.

4. Complicated Cash Forecasting for Companies

In bi-weekly payroll, there are 26 pay periods in a year. This means there will be two months which has three pay periods. The company will be in a much more difficult situation to forecast the monthly cash flow to pay three times in a given month. Extra effort will be needed to plan exceptional situations like this.

5. Difficultly in Monthly Company Budgeting Process

There will be two extra paychecks on a given two months per year when using bi-weekly pay. The company finance department will be in a difficult situation with budgeting since there will be three paychecks given in two months per year. The company should verify in advance whether adequate money is there is planned properly to avoid any last-minute hassle.

6. High Expenses in Payroll Run Administration

Whether the company is administrating the payroll in-house or outsourcing, the bi-weekly payment will incur additional expenses in the payroll run, since there are two additional pay periods in bi-weekly pay. This will result in higher annual payroll management expenses for companies that use biweekly pay frequency.

7. Additional Paper Work Requirement

When compared with semi-monthly pay, there is additional paperwork required for bi-weekly pay since there are more payrolls to be run per year.

Advantages of Semi-Monthly Payroll

1. Company can manage the payroll cash flow well

The company is paying the employees 2 times a month. It is quite easy for the company to manage the receivables accordingly and link those with the employee payments. As an example, if an employee receives $4,000 as a monthly payment, in semi-monthly payment he/she will receive two paychecks per month for each $2.000.

2. Removes the odd day and leap year days

The bi-weekly payroll method has issues with odd days and leaps year days. But the semi-monthly payroll does not have odd days since the payment happens on the middle business day of a month and the last business day of a month, despite whether it is an odd or even day. Also, it eliminates the leap year days issue since both payments happen within the calendar month.

3. Easier to calculate accruals

Semi-monthly payroll accruals are uncomplicated to proceed with. The company payroll department has to divide the agreed annual net payment by 24 and the amount is the net payment of each payroll.

4. Semi-monthly payroll method can be combined with other payroll methods

Most larger companies in the United States and other countries use different payroll methods with employee categories. Most companies use a bi-weekly method for employees with hourly-based pay and a semi-monthly/monthly-based method for employees with a fixed salary. The semi-monthly payroll method is flexible to cater to a certain type of employee as such and has a relevant method for others.

5. The payment plan and method are easy to understand

The semi-monthly method is very easy to understand. There are only two payments applicable in a given calendar month. Simply, the payment happens on the 15th of the month and the last business day of the month. It is simple to comprehend even for an average employee.

6. Company can save money on payroll administration

When compared with bi-weekly pay, there is very less hassle than semi-monthly pay in terms of payroll administration. There are fewer pay periods and it is simple as well. Hence the company can save the payroll processing cost.

Disadvantages of Semi-Monthly Payroll

1. Employees could be confused with the method due to a lack of consistency

In the weekly or bi-weekly payroll processing method, the employee will get the payment on a given day within the week (e.g. Friday). But in the semi-monthly method, it could be any day within the week. Hence, the employee could be confused with the processing.

2. 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 semi-monthly payroll with non-exempt employees since the payroll period could start/end within the middle of the week (e.g. 15th and last day of the month could be any date within the week). Hence it is difficult to pay non-except employees using the semi-monthly payroll method.

3. Some local states do not allow semi-monthly payroll method

Some states in the US and other countries do not allow semi-monthly payroll methods. As an example, 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).

4. New employees have to wait around 2 weeks to receive the first paycheck

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

Advantages of Bi-Monthly Payroll

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.

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 of Bi-Monthly Payroll

1. Difficulty in Personal Budgeting

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.

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.

Frequently Asked Questions (FAQs)

Q: What are the common laws applicable in the United States and Europe for the bi-weekly payroll method?
In the United States, common laws governing bi-weekly payroll include regulations on minimum wage, overtime pay, and timely payment of wages, which employers must adhere to regardless of pay frequency. Similarly, in Europe, laws regarding minimum wage, working hours, and employee rights ensure compliance with bi-weekly payroll practices, emphasizing fair compensation and timely payment. Additionally, both regions may have specific regulations regarding tax withholding, deductions, and reporting requirements associated with bi-weekly pay cycles.

Q: Can employers switch from a one pay frequency to another one?
A: Yes, employers can transition to any pay frequency with proper communication and adherence to legal requirements, ensuring a smooth transition for employees.

Q: What is a Pay Period
A: A pay period refers to the specific time-frame over which an employer calculates and records the work hours of employees and their wages or salaries earned during that period. Pay periods can vary depending on the employer’s policies and practices, but they typically occur on a weekly, bi-weekly (every two weeks), semi-monthly (twice a month), or monthly basis.
Employees report their hours worked during each pay period and employers calculate their earnings based on the hourly rate or salary. Pay periods are important for both employers and employees to ensure accurate compensation and record-keeping. Also it helps employers to manage payroll processing efficiently and comply with labor laws regarding wage payments and reporting.

Q: Is it better for employees to get paid semi-monthly or monthly or bi-weekly?
A: The preference for semi-monthly, monthly, or bi-weekly pay frequencies largely depends on individual financial management and personal preferences. Semi-monthly payments offer a predictable schedule, aligning with monthly expenses, while bi-weekly payments provide consistency and may better match billing cycles. Monthly payments, though less frequent, offer simplicity and may suit those who prefer to budget on a longer time-frame. Ultimately, the best option depends on employees’ financial needs and preferences, with each frequency having its advantages and considerations.

Q: Factors I need to think about before choosing the best payroll schedule for my company?
A: You have to consider several factors such as cash flow management, administrative capacity, employee preferences, and legal requirements prior choosing a payroll schedule. You have to evaluate your business’s financial stability and ability to meet payroll obligations on different schedules. You should assess the administrative workload associated with each payroll frequency by considering your available resources and systems. Take into account the preferences of your employees and how different pay frequencies may impact their financial planning and satisfaction. Lastly, ensure compliance with labor laws and regulations governing pay frequency in your jurisdiction to avoid any legal issues.

Q: Are employees prefer to get paid on bi-weekly basis?
A: Yes, many employees prefer to be paid on a bi-weekly basis because it aligns with regular workweeks, making budgeting and financial planning more manageable. Bi-weekly paychecks provide a consistent and predictable income, contributing to financial stability for employees.

Q: What are the challenges of processing bi-weekly payroll compared with other schedules?
A: Processing bi-weekly payroll can present challenges such as increased frequency of payroll runs, which can demand more time and resources from payroll administrators. Additionally, bi-weekly pay periods may occasionally result in 27 pay periods in a year instead of the usual 26, which can impact budgeting and forecasting. Moreover, calculating overtime and handling holiday pay can be more complex on a bi-weekly schedule compared to other pay frequencies.

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