Strengths and Weaknesses: Semi-Monthly vs. Bi-Weekly Payroll

Semi-monthly vs bi-weekly payroll schedules may seem similar at first glance, but are they the same thing? Understanding the specifics of each payroll type helps employers choose a pay schedule that meets employee expectations and company goals.

Global Payroll

Julienne Raboca

March 6, 2024

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Key Takeaways

Semi-Monthly vs Bi-Weekly

According to the Bureau of Labor Statistics, 43% of businesses in the U.S. use a bi-weekly pay schedule, while 19.8% use semi-monthly payroll.

Bi-Weekly vs Semi-Monthly Payroll
Aspect	Bi-Weekly	Semi-Monthly
Definition	Employees are paid once every two weeks on a specific day of the week, usually on a Friday.	Workers are paid twice a month on specific dates, usually on the 1st and 15th, or the 15th and 30th.
Pay periods	Has 26 pay periods in a year.	Has 24 pay periods per year.
Payday timing	Paydays occur on the same day of the week.	Paydays may vary and fall on a non-working day resulting in early or late payment.
Administrative burden & payroll costs	More administrative burden and payroll costs due to extra pay periods.	Reduced administrative burden and payroll costs due to fewer pay periods.
Pros	Frequent payments, easier budgeting for employees.	Predictable pay dates, reduced HR burden.
Cons	Increased HR burden, potential cash flow issues for employers.	Less frequent payments, changing paydays.

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Key takeaways

Choosing the right payroll schedule helps businesses manage their financial commitments and overall administrative workload while driving employee satisfaction. Semi-monthly vs bi-weekly pay schedules are the most common. Both are great, and the one you choose depends on your industry, company size, number and type of employees, and payday regulations in your region.

What is Semi-Monthly vs Bi-Weekly Payroll?

With a semi-monthly payroll, employees receive payment twice a month. Paychecks are distributed on fixed dates, say 1st and 15th, or 15th and 30th.

Bi-weekly payroll means that employees are paid once every two weeks. Paychecks are distributed every other week, usually on a Friday.

This article delves into the strengths and weaknesses of semi-monthly vs bi-weekly payroll. By the end, you’ll be able to make an informed decision and choose a payroll schedule that aligns with your business goals and workforce needs.

Understanding Bi-Weekly Payroll

As mentioned above, bi-weekly payroll distributes employee paychecks every other Friday. Paying employees once in two weeks results in 26 pay periods per year. This pay schedule is favored by most U.S. companies as it ensures employees are frequently paid without burdening HR teams with excessive admin work.

A bi-weekly payroll works fine for companies that regularly hire a lot of new hourly and salaried employees.

Advantages

More frequent payments: Payroll is processed every 14 days, the same day of the week. Such a predictable pay cycle enables employers to prepare and distribute paychecks accordingly.

Easier budgeting for employees: Workers know the exact day they’ll receive payment. Thus, they can plan and budget their expenses.

Disadvantages

Increased administrative workload: Frequent payroll processing may burden HR and payroll teams. The extra 2 paychecks per year mean that payment has to be processed 3 times during certain months
Potential cash flow challenges for employers: Money goes out every two weeks to pay workers, and 3 times during some months. That may cause cash flow issues for businesses due to inconsistent monthly expenses, increased payroll costs, budgeting challenges, and impact on cash reserves.

Exploring Semi-Monthly Payroll

Employees are paid twice a month on specific dates, with many companies choosing the 1st and the 15th of the month. That results in 24 pay periods per year. Sometimes, paydays may fall on weekends or holidays. Thus, HR teams have to monitor pay dates and make adjustments to ensure timely pay.

Semi-monthly payroll may be a great choice for businesses with employee benefits deductions, such as health insurance and retirement contributions. Paydays align with monthly financial reporting, making it easier to deduct and report deductions from employees’ paychecks.

Advantages

Predictable pay dates: Salaries are spread evenly on fixed monthly dates, enabling employees and employers to plan their finances.
Reduced administrative burden: Less pay periods save time on payroll processing and make it easier to manage benefit deductions.

Disadvantages

Less frequent payments: Bi-monthly has two pay periods less bi-weekly. That means employees on a bi-monthly payroll receive two paychecks less per year.

Challenges for employees with monthly bills: Monthly bills like rent, utilities, and the rest may not align well with the payment schedule, forcing employees to juggle payments.

Factors Influencing Payroll Choice

Several factors come into play when choosing between semi-monthly vs bi-weekly payroll. Below is a list of top factors that influence payroll choice.

Company size and structure
Industry norms and standards
Nature of the workforce (hourly vs. salaried employees)
State laws governing payday frequencies

Best Practices for Implementing Payroll Systems

Below are the key considerations and best practices for implementing an effective payroll schedule:

Needs assessment: Surveys can help you understand company payroll needs and employee payday frequency preferences.
Communicate changes: Explain to your workers the reasons for transitioning to a new payroll schedule and support them as they adjust.

Review and adjust: Monitor the effectiveness of your payroll system and use employee feedback to make changes and adjust accordingly.

Streamlining Payroll With Playroll

Playroll is an innovative global employment platform that offers EOR services and global payroll solutions to help you hire and manage global teams through: