Should We Go With a Semi-Monthly or Bi-weekly Pay Cycle?

by Austin P.
(Florida)

We are looking to outsource our payroll and want to know if it would be better to pay our employees Bi-weekly or Semi-monthly?


Our company is relatively new and growing; about two thirds of our employees are being paid hourly, and the other third are on salary.

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Bi-Weekly Will Work Best For Your Company
by: Best Business Payroll

Austin,

The question of bi-weekly or semi-monthly payroll processing depends on a company's situation.

Employees generally prefer bi-weekly, since it adds two extra pay periods per year, and is easier when it comes to personal budgeting since they get a paycheck every other week. Employees tend to be happier when they know when they are getting paid. Semi-monthly can create confusion when the 15th or last day of the month falls on a weekend.

In addition, you mentioned that two-thirds of your employees are hourly; when it comes to overtime pay, employees generally have an easier time "seeing" where their overtime pay is with two distinct work weeks. With semi-monthly, the overtime rules are sometimes confusing, and some of the OT in a given calendar week will fall in a different pay period than the employee expects.

Semi-monthly payrolls have a couple of advantages. The Finance and Accounting Departments like the fact that the end of the pay cycle coincides with the end of the month, and naturally has a month end date that accommodates year-end processing. This results in no carry overs like bi-weekly does. You have simpler wage increase start dates, benefit eligibility dates, leave accruals, and the like. In addition, semi-monthly costs a company less, with 24 pay cycles vs. 26. Your salaried employees will probably be fine with the semi-monthly pay frequency.

Some companies use a combination of methods: salaried employees receive semi-monthly, while hourly employees receive bi-weekly.

Keep in mind that each state has different pay frequency requirements and thus many companies choose bi-weekly. In some states, weekly payroll is required, so you should be sure to check with your state's Department of Labor.

In your situation, you would be best off running payroll bi-weekly, at least for the hourly employees. The additional fees associated with two extra payrolls per year will most likely be offset by the savings in the time spent by payroll professionals in employee explanation, maintaining a calendar of fluctuating dates for tax deposits, posting to general ledger, download/file transfers to third party administrators for benefit management, and so on.

Best of luck to you.

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Bi-Weekly Payroll
by: Austin

Thanks for taking the time to answer my question in such detail. We were leaning towards semi-monthly for all of our employees, but after considering the points you made about benefits the hourly employees would receive from bi-weekly, we decided to go with your suggestion.

Thanks again for your help!!

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Semi-monthly better for employees
by: Anonymous

Now that I'm on semi-monthly I prefer this as an employee. Much easier to keep track of and do budgeting since all bills are monthly.

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A guess what percentage uses monthly payment?
by: Wytze

Hi,

I'm building an application to help consumers figure out their personal finances. For this, it's important to know what the US market looks like in terms of when people get paid.

As you wrote, bi-weekly is common, semi-monthly less so, and sometimes weekly is required by state law.

I have two questions:
What share of employees are paid monthly?
What share of employees are paid biweekly?

It seems impossible to come by public statistics that address these questions. So I'm happy with anyone's estimate if they have experience with payroll.

Kind regards,
Wytze

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Semi is he way to go
by: Chuck

I have been payed both bi-weekly and semi-weekly. I prefer emu-monthly,because I don't have to look at a calendar to know when my pay days are. I know its the 5th and 20th of every month.

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Employer benefits
by: Anonymous

What would be the benefits for the employer to go from bimonthly to biweekly?

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