Biweekly vs Semimonthly Payroll

Biweekly vs Semimonthly Payroll | Accounting Smarts
Charles Hall

Last updated by

Charles Hall

on

March 1, 2021

Whether you’re an employee deciding on a job or a business owner preparing to pay their employees, deciding between biweekly and semimonthly payrolls is an important consideration.

Whether you’re an employee deciding on a job or a business owner preparing to pay their employees, deciding between biweekly and semimonthly payrolls is an important consideration.

Knowing the difference between the two pay frequencies can make your decision easier.

Biweekly and semimonthly payrolls differ in the frequency paychecks are received. Biweekly payrolls offer paychecks every other week, resulting in two paychecks a month, with two months out the year in which three checks are received. Semimonthly payrolls offer two checks per month for an entire year.

Biweekly and semimonthly payrolls also offer different advantages and disadvantages for employees and employers, which we’ll also cover below.

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Differences Between Biweekly and Semimonthly Payroll

Businesses and institutions typically decide on the frequency in which their employees are paid, which often comes down between a biweekly or semimonthly pay schedule. 

Biweekly Payroll

Biweekly pay refers to a schedule of employees getting paid every other week; this means that employees can expect to get paid 26 times per year (and 27 times if there’s a leap year). 

In biweekly pay schedules, employees receive their paychecks consistently on the same day. This means that if you were paid on Friday, you’d be paid on that Friday the week after next. Biweekly pay is also the most common form of paying employees. 

Semimonthly Payroll

Semimonthly—as the name implies—is a pay schedule in which employees are paid twice a month. This is also referred to as bimonthly, and in this type of payroll, employees get paid on particular dates. 

Pay is processed on different days of the week, resulting in paychecks being received approximately 15 days apart. If employees are paid on the 1st day of the month, then they can expect to receive their next paycheck 15 days later. 

With a semimonthly payroll, paychecks are likely to be more inconsistent. While they will always predictably be twice a month, which days those paychecks end up on can vary. Even if your employees get their paychecks in the middle of the month and the last day of the month every month, the days can vary. Employees may receive their first paycheck of the month on a Wednesday and the second paycheck on a Monday. 

Biweekly vs. Semimonthly: Paychecks Per Year

Biweekly and semimonthly payroll options can be confusing because, for the most part, the number of paychecks received per month is exactly the same. Receiving a paycheck every other week versus twice a month results in a similar number of paychecks per year. However, there’s more to the pay periods than is initially apparent. 

The difference between a biweekly 26 paychecks per year and a semimonthly 24 paychecks a year can seem negligible. Despite the slight difference in the frequency of paychecks received per year, this distinction can have some considerable ramifications in paychecks every month. 

Paid Amounts

Since a salary can be held at a constant and isn’t influenced by the number of paychecks received per year, that money has to be distributed evenly regardless of the number of paychecks employees receive per year. 

This means that in a biweekly pay schedule, the increase in paychecks results in an, on average, lower paycheck. The two extra paychecks per year make up for the difference. In a semimonthly payroll, the paychecks are generally larger. There are fewer paychecks to distribute an employee’s salary over, so each individual paycheck will be greater. 

The math looks like this: If an employee makes $50,000 a year and is being paid biweekly, you can expect their gross wages to be $1,923.07 every other week. If the same employee is getting paid semimonthly, you can expect their gross wages to be $2,083.33. 

It should be noted that regardless of the employer's payment frequency, the employee will receive the same amount of money annually. So even if the checks in a semimonthly payroll are higher, they’ll still make $50,000 and owe the same amount of money in taxes per year.

Is Biweekly or Semimonthly Payroll Better?

Each payroll style has its own pros and cons. Knowing what makes each option attractive or not can help in your choice. 

Biweekly Payroll Advantages

The greater consistency that comes with biweekly paychecks can result in an easier time managing finances. Financial management tends to benefit from clear paydays and due dates, so having a reliable, consistent paycheck can help alleviate the potential stress of keeping finances in order. 

Additionally, despite making the same amount of money per paycheck, the two “bonus” paychecks can make it easier for your employees to save money, pay back student loans, or make down payments because of the additional available money in the months in which they’re paid more. 

If you have hourly employees, a biweekly pay schedule makes it significantly easier to calculate overtime. 

Biweekly Payroll Disadvantages 

If you’re an employer, paying your employees a third paycheck in certain months can set your business back if you aren’t prepared. You need to be attentive to the money in your payroll account to prevent future problems. If your business didn’t prepare for the months that result in three paychecks, it could be very hard to budget later on. 

In general, bookkeeping for biweekly paychecks can be complicated with the addition of the extra two paychecks during the year. The reason why is because it makes it harder to predict future cash flow. 

Lastly, there’s a chance that as a business owner, you’ll be incurring higher costs for the frequency in which paychecks are dispersed. Different payroll providers can tack on additional costs for each occasion payroll is run. So if you’re using a biweekly payroll system, then you’ll have a higher annual cost than in a bimonthly frequency. 

Semimonthly Payroll Advantages 

Generally speaking, with semimonthly pay schedules, you’re going to find that the processing time for payroll will be slightly less than biweekly pay schedules. Because payroll is run 24 times a year versus 26 times a year, there will be slightly less work for the person in charge of payroll at your company. The likelihood of errors decreases, as well. 

When benefits have to be made, managing cash flow can be easier. Because deductions such as healthcare or insurance typically occur every month, semimonthly payrolls make them easier to manage. 

Semimonthly Payroll Disadvantages

Calculating for holidays and weekends is a reality that should be anticipated if you’re considering a semimonthly payroll. Despite paydays consistently being 15 days apart, the day it rests on is practically random, meaning that there’s a chance that paydays can fall on a weekend or holiday. 

If that’s the case, the HR department needs to be prepared to either pay employees in advance or just flat out delay their paychecks; this can cause confusion and frustration in employees and employers alike. 

Final Thoughts

The main difference between biweekly and semimonthly payrolls is the frequency in which paychecks are distributed. Biweekly payroll distributes paychecks 26 times a year, while semimonthly paychecks distribute their paychecks 24 times a year. Despite the minuscule difference, this can result in smaller or bigger paychecks, regardless of the same annual income. 

Personal preference is definitely important when choosing between the two payroll styles. If you like your paychecks to be consistent to make accounting a little easier—then a biweekly payroll style is better for you (and it’s also the more common option among employers). 

However, if you want to reduce time processing payroll and lower the chance for errors, then perhaps a semimonthly payroll is the better choice. 

Charles Hall

Charles Hall

Charles has spent 25 plus years in the world of accounting and business. His experience includes working as a CPA/Auditor international accounting firms. He has worked as a controller and as a COO for small to medium sized companies.

Learn more about Charles Hall