Bi-weekly vs. Semi-Monthly Pay Periods: Definitions, Key Differences, Pros & Cons

Bi-weekly vs. semi-monthly pay: what are the differences?

Bi-weekly and semi-monthly terms can be very confusing as employees generally receive two paychecks/ month. Yet, this rule applies only for ten months/ year. 

A few differences separate one payment method from the other.

Frequency of payment

If you choose the semi-monthly payment schedule, your workers will receive 24 paychecks per year, two paychecks per month.

12 (months in a year) x 2 (twice a month) = 24 paychecks/ year

On the other hand, paying your employees bi-weekly means they receive a paycheck 26 times a year. There are two months a year when your employees receive three paychecks.

52 (weeks in a year): 2 (every other week) = 26 paychecks/ year

Payment day or date

It is up to the employers to decide the days of salary payment, whether bi-weekly or semi-monthly. 

A bi-weekly payroll usually means you transfer money into your employees' bank accounts on the same day, let's say, Friday every other week. 

Semi-monthly pay has a slightly different cadence: on the 15th and the last day of the month. If the payment day is during the weekend, companies commonly pay the salary on the preceding Friday. 

From employers' perspective, the semi-monthly payment is preferable as there are two fewer salaries/ year to calculate and transfer. The downside of this frequency is that the payment day is shifting around different days of the week.

By contrast, employees prefer the bi-weekly payroll since they receive two "additional" paychecks each year. 

Related: How many weeks in a month?

Paycheck amount

The amount on your employee's paychecks varies depending on the payroll frequency. 

When you pay your employees semi-monthly, the amount transferred to their bank account is higher. 

Paying bi-weekly means you transfer less money every two other Fridays. But for two months a year, you will provide a third paycheck to compensate for the difference. 

Key factors to consider when choosing the payment frequency

Choosing the appropriate pay schedule is essential for every business, and this decision needs considerate attention. 

Here are the key factors to review when evaluating your options.

State laws

When you choose your company's payroll schedule, the first factor you must consider is the state law where you pay your employee's wages. Certain states may limit the salary payment options, so you must know the law and comply.

Cash flow

A consistent cash flow is paramount to attract and engage your employees. Rather than losing a valuable employee, you must carefully evaluate the payroll options and choose the one that allows you to pay your workers accurately and on time. 

Payroll software

The easiest method to ensure your company's payroll schedule is accurate and timely is to run payroll software. A reliable solution helps you automate salary payments and navigate smoothly through the complexities of the payroll process. 

A robust payroll software simplifies many redundant and time-consuming processes, such as:

• Time-tracking and attendance
• Compensations and overtime
• Taxes, deductions, and compliance
• Employee records
• Integrations

Bi-weekly payment

Bi-weekly payment refers to the transfer of salary every other week on a specific day. Most commonly, companies make these payments on Fridays.

Advantages:

• You transfer smaller sums to your employees' bank accounts during the year.
• Calculating overtime is much easier as it takes place every other two weeks.
• Your employees can better plan expenses and budget their finances because they receive a paycheck on the same day every other week.

Disadvantages: 

• Bi-weekly pay requires additional administrative work from your payroll department. 
• Since you have 26 pay periods per year, the paychecks are slightly smaller compared to 24 paychecks paid on a semi-monthly basis.
• The more frequently you pay, the more money the company spends on bank fees or paper forms if you still use manual paychecks. You also have to consider that there are more payroll periods, the more time spent processing the payroll.

Semi-monthly payment

Semi-monthly payments take place on two specific dates each month. Usually, these dates are on the 15th and 30th of the month, but some companies may pay their employees on the 1st and 15th. Regardless of the dates, you are looking at 24 payments during a year. 

Advantages: 

• When you pay your employees semi-monthly, they receive higher sums in their bank accounts. 
• The payroll process is transparent and easy to understand. When paying semi-monthly, your employees know the specific dates of the month when their pay is due. 
• Managing deductions is smoother when paying your workers' wages semi-monthly, as deductions and benefits run on a monthly basis. 

Disadvantages:

• The payment day varies, making it difficult for payroll teams to follow and complete the process, usually when the date falls on a weekend.
• The semi-monthly pay is unsuitable for hourly employees, mainly if they work overtime and earn additional income. 
• Paying your employees semi-monthly can be challenging for new hires as they may wait longer to get their first paycheck.

Bottom line

In a nutshell, which one is better: the semi-monthly or bi-weekly pay?

The answer to this question depends on your organization and employees' current and future needs.

As such, if you are starting a company or deciding to change the frequency of your payroll schedule, you must carefully consider the business environment, the type of work in your organization (full or part-time), and workers' expectations.  

Consider your employees' happiness, choose the solution that motivates and engages them, and you will see your company thriving.