Reviewing the semimonthly vs biweekly payroll differences is important for both employers who need an efficient payroll schedule and employees who want a reliable paycheck.
In accounting, semimonthly payrolls are paid twice each month for a total of 24 paychecks per year. In contrast, with the biweekly schedule, employees receive payments on a fortnightly basis for a total of 26 each year—meaning two months have an extra payment.
Both the semimonthly and biweekly payment schemes are preferred over the weekly and monthly ones since the former requires employers to spend more accounting resources while the latter means employees have to wait longer between paychecks.
We explore this topic in detail below!
What Is a Semimonthly Pay Schedule?
Semimonthly pay schedules are those that pay out twice each month regardless of the number of days in a month. Employees receive one payment in the middle of the month (typically the 15th) and the other on the month’s first or last day. Therefore, employees on a semimonthly pay schedule will receive a total of 24 paychecks each year (two for each month).
For this reason, the length of time between checks will vary depending on the month’s length. For instance, while in February, workers would receive a paycheck every 14 days, in months with 31 days, these two periods would increase to 15 and 16 days.
Who Is It Right for?
Semimonthly payments are most suitable for salaried employees who are on an organization’s permanent payroll and have little to no overtime in most cases.
Pros of Semimonthly Pay
Semimonthly pay schedules mostly benefit companies in several regards:
- Straightforward Payment Schedules—employers and employees working with a semimonthly payment schedule know they will always send and receive two paychecks on the same two days of the month (may vary during holidays or weekends). Because of that, employees can easily budget for all their future expenses;
- More Efficient Accounting—needless to say, employers paying out on a semimonthly basis spend less on human resources as they have to run and pay for two fewer payrolls compared to the biweekly alternative;
- Easier Accounting Calculations—businesses keep a consistent budget as they spend the same amount for paychecks each month (less adjusting entries), semimonthly payments align with the standard business cycle, and they facilitate the deduction calculations for employees, such as health benefits and 401k contributions;
- Easy Disbursement of Benefits—some employers offer additional employee benefits that must be incorporated into an existing payroll system—easily done with semimonthly payments as they can be divided by 24 and paid twice a month.
Cons of Semimonthly Pay
The main problem areas of semimonthly pay are related to hourly employees:
- Unsuitable for Hourly Employees—employees with flexible hours often keep an inconsistent work schedule and work overtime or during weekends, which makes it challenging to account for in a set semimonthly payment scheme;
- Changing Payment Days—paydays can also be delayed or pushed ahead if the regular date falls on a holiday or a weekend, which introduces inconsistency for both the company’s accounting team and the employees;
- Delayed Payments for New Employees—new employees typically have to wait for a while (depending on when they joined the company) to get their whole paycheck as they have to be fully integrated into a semimonthly payment structure.
What Is a Biweekly Pay Schedule?
The biweekly payment schedule guarantees one payment every two weeks distributed on the same day of the week (Friday in most cases). Since there are 52 weeks in a year, employees on the biweekly scheme would receive a total of 26 paychecks. Therefore, there would be two months in a year with an “extra” paycheck.
Due to the regularity of the paychecks, employees also receive the same amount with each paycheck since they cover the same number of days, which is not always the case with the semimonthly payment plan (some months are longer than others).
Who Is It Right for?
Biweekly payment schemes work better with hourly employees with unpredictable work hours and additional obligations, as biweekly pay never splits overtime hours.
Pros of Biweekly Pay
Most employees prefer being on a biweekly payment plan for several reasons:
- Simpler Overtime Calculation—understanding and calculating overtime is much easier with a biweekly payment scheme since it can be paid out in the same period it was recorded, which is convenient for both businesses and employees;
- Two “extra” paychecks—despite receiving the same annual salary, employees on a biweekly plan receive two additional paychecks (26 instead of 24), which often come in handy for unexpected expenses or big payments;
- Regular Payroll Schedule—both employees and employers know that the transfer of payment takes place exactly every two weeks on a pre-chosen day of the week, which results in a consistent and regular payment pace.
Cons of Biweekly Pay
Businesses dislike biweekly payments due to the increased costs and complications:
- More Accounting Hassle—the accounting team of a company with a biweekly payment schedule has to spend additional human resources to figure out and pay out the increased number of irregular and/or overtime payments;
- Increased Payroll Expenses—in addition to the extra hours needed to process the extra payment dates, companies will also have extra charges for the additional payroll runs, especially if they are using payroll providers;
- Additional Budget Uncertainties—companies using biweekly schemes have to face two months with three payment dates in a single year, which may set back smaller businesses that were not adequately prepared for that.
The Major Differences Summed Up
Ultimately, three key differences separate semimonthly and biweekly payment schemes:
- Day of payment—varying day depending on the date (start and middle of the month) vs the exact day of the week every two weeks (typically Friday);
- Number of paychecks per year—24 for semimonthly payments (twice a month) vs 26 for biweekly payments (once every other week);
- Size of paychecks—larger but fewer paychecks (semimonthly) vs smaller but two extra paychecks (biweekly); for instance, while the semimonthly payment for a $50,000 salary is $2083.3, the biweekly amount comes up to $1923 (before deductions).
Which Is Better Overall?
As you can see, both payroll options come with their own pros and cons, which makes them suitable for different scenarios. That said, as a general rule of thumb, the semimonthly system is better for employers, whereas the biweekly one suits employees more.
After all, semimonthly payrolls are less complicated to track and calculate, thus, requiring fewer resources. But, incorporating hourly wage workers is rather complicated.
On the other hand, biweekly payments introduce more accounting issues and higher costs, but employees love them as they are regular and offer two “extra” paychecks.
- Semimonthly payrolls come with 24 paychecks per year (twice per month);
- Biweekly payrolls deliver 26 paychecks per year (once every two weeks);
- Semimonthly payments are ideal for salaried employees with consistent work hours;
- Biweekly paying systems are more effective for hourly workers with infrequent hours;
- While semimonthly plans produce slightly higher payments, biweekly schemes offer two “extra” payments for two months in a year.