What is Bi-weekly Pay? Bi-weekly vs Bi-monthly Pay

What is Bi-weekly Pay? Bi-weekly vs Bi-monthly Pay

When you have employees, you have to run payroll so they can receive their wages.

Choosing a payment schedule can cause a lot of confusion. Your selection should suit your company’s budgeting, HR or administrator, and, of course, your employee.

Also, you need to follow the legal obligations of the state.

Bi-weekly pay is the most popular pay schedule among companies in the U.S. If you wonder how it works, just check out this article.

Table of Content

Check out these definitions before jumping to the main part.

  • Payroll: payroll is a list of employees with their calculated wages. Or, payroll can refer to the process of calculating wages
  • A check/paycheck: a check or paycheck is a document that instructs the bank to transfer an amount of money from one bank account to another one.
  • A pay date: a pay date is the date in a month that an employee is paid
  • An hourly employee: an hourly employee is paid according to hours they work over
  • A salaried employee: a salaried employee is paid based on an annual amount of money
  • A pay period/schedule: a pay period is a recurring schedule which determines how often you will pay your employees

What is bi-weekly pay?

Just like the name itself, bi-weekly means paying your employees every two weeks.

Frequently, a pay schedule/period will recur within a certain timeframe and won’t change until there is a new pay period.

How about the pay date?

You can choose any weekday to be a pay date. Once chosen, this day will be a set day. It can be Monday, Wednesday, or Friday.

For example, if you want to pay on Friday, then every other Friday in a month, you will pay for your employees.

bi-weekly pay
Bi-weekly pay means paying every two weeks

Frequently, the pay date is 7 days after the end date of the work period.

Also, with this pay schedule, your employees will receive 365/14 = 26 (checks) per year. Because of this, every year, there are two months when you receive three checks.

How to calculate bi-weekly pay?

Actually, you just need two steps:

  • Step 1: Identify the gross annual salary
  • Step 2: Divide that number by 26

The number you get is the bi-weekly pay.

What is bi-monthly pay?

A bi-monthly or semi-monthly pay means paying twice a month. This pay schedule results in 12 * 2 = 24 (checks) during the year.

bi-weekly pay
You pay your employees twice a month with bi-monthly pay

Frequently, the pay dates are 15 days apart. The two pad dates can be on the first and the 15th every month, however, you can freely choose your own schedule.

Which is better? Bi-weekly pay or bi-monthly pay?

Look at the two definitions, you might get confused:

“Are you paying every two weeks and paying twice a month the same?”

However, they are totally different and each has its own pros and cons. Let’s see which type will fit your organization.

Bi-weekly pay pros and cons

Pros

  • You have to pay less money per check than when paying on a bi-monthly basis
  • Your employees get paid often. This helps you to maintain employee engagement, boost work ethic and increase productivity in the workplace.
  • Reduce time spent on payroll processing. With hourly employees, you just need to pay according to the number of hours he has worked over the past two weeks.
  • Overtime work is easier to calculate. You just need to add the number of overtime hours to the paycheck.
bi-weeky pay
Bi-weekly pay reduces the overtime calculating time

Cons

  • Require 2 more payroll processing times than bi-monthly pay
  • Reach to 27 payroll processing times in lap years because it has 366 days instead of 365 days
  • Difficult to keep track of the paydays or paychecks. The paydays can fall on any two or three dates of a month.
  • The extra two paychecks can set your business back if you haven’t prepared for the additional paychecks two times in a year

Bi-monthly pay pros and cons

Pros:

  • Require 2 or 3 less payroll processing times than bi-weekly pay
  • No additional expenses because you will pay two times every month
  • Less suffering for employees to budget because paychecks arrive on the same date each month
bi-weekly pay
Bi-monthly pay pros & cons

Cons:

  • You have to pay more money per check than you have to when paying on a bi-weekly basis
  • Time-wasting on hourly payroll processing. Since some months have 31 days and some have 30 days, hourly employees sometimes can get paid for the different numbers of days.

How to choose the best pay schedule for your business?

Besides bi-weekly pay, there are some other types of pay schedules, which are:

  • Weekly pay: pay every week with 52 paychecks
  • Monthly pay: pay every month with 12 paychecks

According to the U.S Bureau of Labor Statistics, bi-weekly is the most common pay period among companies nationally. The second most popular pay frequency is the weekly model. On the other hand, monthly pay models are the least implemented.

Choosing a pay period is one of the first steps that all companies take when beginning to hire the first employee to work for them.

Before choosing a pay schedule, you should consider these following factors:

Number of employees

As for small businesses, being clear about the pay schedule is very important. Because, if the money is tight, you really need to know when you have to pay for your employee.

However, if you have a small number of employees, there will be not many differences among selections.

On the other hand, if you have a large employee number, you might want to project the financial pressure coming along with each payroll schedule.

bi-weekly pay
Consider your employee number in choosing the pay schedule

Costs and time

When you run your payroll more frequently, you might have to pay more money with hidden fees.

If your payroll software provider allows you to run unlimited payrolls without paying extra fees then cost might not be a factor. However, if the provider charges per payroll run, then you probably choose the most optimized pay schedule.

Also, remember to make sure the time you spent on paying your employees, you will not want it to take like forever.

Hourly vs salary employees

When it comes to hourly employees, let’s be honest, they will love bi-weekly pay, because if predictable, clear and consistent. On the other hand, salaried workers will like bi-monthly pay because they are exempt from overtime.

Thus, some companies have more than one pay period. They use the bi-monthly pay model for owners or managers and bi-weekly pay for hourly employees.

Conclusion

The long-standing businesses might also want to change their pay period due to the conditions change or when their employees request for a pay period reconsideration.

From the point of view of an employee, knowing exactly when you will be paid is critical for managing the budget.

Payroll can be your business’s largest expense, so choose a pay schedule wisely!

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