What Impact Would There Be to Salaried Employees When Changing Paydays From Bi-weekly to Semi-monthly Mid-year?

by Sherrill Martin
(Portland, OR)

We switched our paydays from bi-weekly to semi-monthly on 5/15/10 and now one of our employees is questioning their annual salary calculation.


Would this change cause problems in the salary calculation since we started the year paying employees 1/26th of their salary and then went to 1/24th of their salary? We think that this may be the case because there are fewer days in the beginning of the year than the end of the year.

Comments for What Impact Would There Be to Salaried Employees When Changing Paydays From Bi-weekly to Semi-monthly Mid-year?

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Bi-Weekly to Semi-Monthly Impact
by: Best Business Payroll

Going from bi-weekly payroll (26 payrolls per year) to semi-monthly payroll (24 payrolls per year)mid-year will probably create some temporary challenges for you.

Presuming your pay dates don't line up nicely (if both happened to fall on the 15th, for example) the first pay period of the new frequency would have to be a little larger or smaller so that there is no gap in between the Period End date of the old frequency and the Period Begin of the new one. Obviously, this is not a problem when going from weekly to bi-weekly where the pay frequency is simply cut in half. This is a problem when going from bi-weekly to semi-monthly because the two frequencies divy up the month so differently. You will need to be sure that the hours worked during those "gap days" are paid accordingly.

Your employee's fears about losing pay simply based on there being more days with semi-monthly than bi-weekly are unfounded, however. Take for example a hypothetical salary of $10,000. With 26 pay periods per year, he would receive $384.62 bi-weekly before taxes; with 24 pay periods per year he would receive $416.67 semi-monthly.

Presuming 1/4 of the year (for simplicity's sake) was at bi-weekly, that would be 6.5 pay periods (26 x .25), for a total paid bi-weekly of $2,500.03 (6.5 bi-weekly pay periods x $384.62). The remaining 3/4 of the year would be paid semi-monthly, for 18 pay periods (24 x .75) for a total payment of $7500.06 (18 semi-monthly pay periods x $416.67). His total annual salary paid would then equal $10,000.09 ($2,500.03 + $7500.06)

In addition, you will need to check a few things: earnings/deductions that might fluctuate due to different frequency, and your employee's Direct Deposits. Any fixed amount going into a checking account or a direct deposit paying back a loan will have to be modified.

The good news is that there should not be any problem with the payroll taxes, which should work out once you have addressed the above issues.

Switching from bi-weekly to semi-monthly payroll CAN be done as long as you pay attention to detail, and in the end, many find semi-monthly payroll easier to administer.

Best of luck sorting it all out!

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Wrong, do it again!
by: Anonymous

If this is not a leap year your fears are well founded.

Assume there are 64 days in the 1st quarter, 65 in the second, 65 in the third and 66 in the fourth.

Under bi-weekly pay you will get slightly less money in the 1st quarter and slightly more in the fourth.

Under semi-monthly pay you will get the same amount each quarter.

So if you are paid less for the 1st quarter, and not paid more for the last quarter you lose a day's pay that year.

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Semi-Monthly to Biweekly Transition for Exempt Employees
by: Anonymous

My company is transitioning from the semi-monthly to biweekly in the middle of the year. The transition occured on May 25. So for 10 pay periods, we were on semi-monthly. There were 15 pay periods left in the year. To calculate the new biweekly pay period amounts, they took our annual salary and divided by 26. So, when we transitioned we were one pay period behind from a biweekly schedule. With the calculations they have used I will now recieve less money year-to- date on my last pay check for the year than I would have received on the semi-monthly schedule. Did they do the calculation correctly for a mid-year swap?

I would have taken what was left of the annual salary to be paid in the rest of the year and divided by the number of pay periods left.

Example: Exempt employee who makes $60,000/year.
From Jan - May they had been paid $25,000. So for the rest of the year each pay period amount should be $35,000/15 pay periods left, which equals $2,333.33.

With thier calcs it is $2,307.69. So the last pay stub will show $384.62 less for the year-to-date amount.

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I agree
by: Anonymous

I am dealing with the same thing except going from bi-weekly to semi-monthly. I figured it the same as you did. I presented this to our payroll/finance dept and they keep telling me I'm wrong and sometimes it will be more and other times it will be less. How can that be? Shouldn't we expect to earn our annually base salary every year and not a penny more or less unless there is an increase?

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