They are both issued at least twice a month, and both are popular methods to process payroll. In fact, bimonthly and biweekly payroll are different, especially when it comes to the pay frequency. Each offers advantages and disadvantages for employees and those who prepare the payroll. Learn more about these two systems to help you decide which one is the best fit for your company.
Biweekly pay is issued every other week for a total of 26 times per year. Most companies pay on the same day every two weeks, most often on Fridays. A semi-monthly payroll is when a company distributes paychecks twice a month. This will typically happen on the 15th and 30th or 31st, totalling 24 paychecks for the whole year, 2 less than the bi-weekly model.
There are some important differences when it comes to semi-monthly vs. Let's talk semi-monthly vs. They will know exactly when to expect their cheques. Also, your payroll clerk will be able to keep a consistent schedule and pace with how they distribute them. The one downside to biweekly payments is the inconsistency in how much money you are paying out each month.
There will always be a couple months where you will have three paydays instead of two. It will be up to you and your accountant to make sure you will have enough to cover the extra payout.
In general, bi-weekly payrolls are used by companies that pay their employees a low to average hourly wage. If your employees punch in and out and work a different amount of hours each week, then a bi-weekly payroll will make more sense. Specifically, full-time salaried employees are compensated for 2, work hours yearly. As an employer, to arrive at the hours for a biweekly employee, divide 2, by 26 pay periods.
To arrive at hours for a semimonthly employee, divide 2, by 24 pay periods. To arrive at salary for both pay groups, divide the annual salary by the number of annual pay periods. Payroll processing for biweekly hourly employees is straightforward; however, processing for semimonthly hourly employees can get confusing. For biweekly hourly employees, simply pay the employee according to the number of hours he worked over the past two weeks.
For semimonthly hourly employees, to avoid confusion, most employers give employees a payroll calendar, which shows when semimonthly time cards should be submitted for each pay period. Bi-weekly pay equates to smaller paychecks per pay period, but there are more pay periods than with a semi-monthly payroll system. A month with three pay periods can be a challenge for a small business that might collect income from clients on a net or net basis.
Net means a client pays 15 days after being billed, while net is 30 days after being billed. Semi-monthly pay always occurs only twice a month, but the paychecks are larger. It might be easier to budget payroll with a semi-monthly payroll system, but it could also lead to cash crunches during parts of the month.
Whether you choose a bi-weekly or bi-monthly payroll system depends on the needs of your business. If having set paydays that coincide with when your clients pay you is a large consideration, a bi-monthly pay system could be the right choice. If you want to pay out less each pay period even though you'll have two additional pay periods during the year, the bi-weekly option could be the right choice.
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