A biweekly pay schedule is the most common pay frequency. Here’s how your small business can implement it.
- Every two weeks, there are 26 paychecks in a year, which are referred to as biweekly pay.
- Semimonthly pay, which is distributed twice each month and 24 times year, is different from biweekly pay.
- Biweekly pay usage depends on a variety of variables, but the ideal approach to execute it is always through payroll software.
- Small company owners who want to implement a biweekly pay plan should read this article.
Consider a time in the past when you weren’t a small company owner but rather an employee. You may have periodically reminded yourself while you laboured at your chores that getting paid every two weeks made it all worthwhile. The crucial phrase is “every two weeks.” On a biweekly pay plan, many small firms pay their staff every other week. Continue reading to discover how to administrate and apply this timetable for your company.
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What is a biweekly pay schedule?
The payment of employee earnings every two weeks—often on a Friday—is known as a biweekly pay plan. For instance, suppose your staff members were paid biweekly in October 2021 and got their paychecks on Friday, October 8 and Friday, October 22, respectively.
Theoretically, biweekly pay schedules result in two employee payments every month because there are four weeks in a month. In fact, biweekly pay patterns might occasionally mean three payments each month for employees. Your biweekly paydays would have been Dec. 1, 15 and 29 if Dec. 1 had been the start of the month as opposed to Dec. 8. On a biweekly pay plan, it translates to three paychecks every month.
What’s the difference between biweekly and bimonthly pay schedules?
Biweekly pay arrangements are sometimes mistaken with the semimonthly pay schedule. Although it is incorrect, semimonthly salary is sometimes referred to as “bimonthly.” Bimonthly would mean every other month, but semimonthly would indicate twice a month, as you can see from the definition of “biweekly.”
These pay schedules may appear to be the same since semimonthly pay results in two paychecks each month and biweekly pay plans sometimes provide two paychecks per month. Biweekly and semimonthly aren’t exactly the same, as the aforementioned example demonstrates. They diverge in these three crucial areas:
- Paychecks are sent every two weeks under a biweekly pay schedule, nearly invariably on the same day of the week. Two payments every month—not always on the same day of the week—are the outcome of semimonthly pay schedules. For example, if you pay your staff twice a month on the 15th and 30th, you can end up paying them on a Wednesday and a Thursday.
- In some months, biweekly pay schedules might result in three payments for an employee. However, semimonthly pay schedules result in two payrolls for employees per month.
- Biweekly compensation results in 26 employee payments annually because there are 52 weeks in a year. Semimonthly compensation results in 24 employee payments annually because there are 12 months in a year. As a result, compared to semimonthly checks, biweekly checks can include a somewhat lower amount of earnings.
Are biweekly pay schedules best for hourly or salaried employees?
Whether biweekly pay plans are suitable for both hourly and salaried employees may be a question that you have. The majority of payroll and HR professionals concur that biweekly pay is an excellent option for salaried staff. Whether biweekly is appropriate for hourly employees is a matter of opinion.
According to some experts, weekly pay plans make it easier for hourly workers to keep track of the amount of overtime they put in each week. These experts could also advise against biweekly compensation for low-wage workers because it might be difficult to manage one’s cash flow. Low-wage workers may find it simpler to pay their bills and avoid severe late-payment penalties if they have weekly access to cash.
Other experts, however, contend that because they are simpler for your company to manage, biweekly pay plans for hourly employees should still be your first choice.
How do you calculate biweekly pay for hourly and salaried employees?
Calculating biweekly salary is often simple for both hourly and salaried employees. Your payroll software would automate them for you even if they were challenging. To determine hourly employees’ biweekly pay, follow these steps:
- Take a look at your timesheets or timeclock to find the employee’s total number of hours worked during the biweekly pay period.
- Don’t forget to include any paid holidays or other paid time off.
- Your employee’s hours worked throughout the pay period should include this time.
- Divide this amount by the worker’s hourly rate.
- Your employee’s gross pay for the time period is the outcome. To determine the employee’s net pay, be careful to subtract any withholdings. You will finally pay the employee this amount.
How do you calculate biweekly pay for salaried employees?
To determine a salaried employee’s biweekly compensation, follow these three steps:
- Verify the employee’s salary by checking your payroll programme.
- Divide this wage by 26, as there are 26 biweekly pay periods in a year.
- The last figure represents the worker’s gross salary for this payday. You’ll be left with net pay after deductions, which is what you’ll really pay.
Which industries and business sizes use which pay schedules?
43% of companies paid their employees biweekly as of February 2020, according to the U.S. Bureau of Labor Statistics (BLS). Biweekly compensation is now the most common choice across all industries, according to this statistic.
Employers in the trades, manufacturing, and construction frequently pay weekly, according to the BLS. In fact, 33% of companies in all industries make weekly payments. In 19% of businesses, semimonthly pay is the preferred schedule, and in the banking sector, it’s almost as popular as biweekly. Some firms in the financial, professional, educational, healthcare, and recreational sectors do offer monthly payments, although just 4.7% of them do so.
The choice of compensation schedule may be more closely correlated with organization size. According to BLS statistics from February 2020, the proportion of biweekly pay rises as a company’s workforce grows. However, it’s interesting to note that 34.9% of businesses with fewer than 10 workers pay weekly, as opposed to 33.7% who pay biweekly. Employers with ten or more staff members often pay monthly. Learn more about the various payroll frequency choices available.
The pros and cons of biweekly pay
A technique that is common among small firms is undoubtedly very beneficial to employers. This idea still applies to biweekly pay. Nevertheless, it is not without flaws.
You could decide to pay your personnel every two weeks for the following reasons.
Predictability:
You will be aware that you must run payroll every two weeks if you pick biweekly pay. You’ll also be aware that you need to run payroll long enough in advance to meet this Friday deadline because biweekly paychecks often come on Fridays. Additionally, regular, predictable payout intervals for your staff members might aid them in budgeting.
Easy overtime calculations:
It’s true that biweekly pay schedules could make calculating overtime more difficult than they would with weekly compensation. But biweekly pay is a piece of cake compared to semimonthly pay when it comes to overtime compensation. To do your estimates, you only need to verify an employee’s overtime hours for two consecutive workweeks. Semimonthly pay cycles can divide workweeks into two distinct pay cycles, making overtime computations more challenging.
More paychecks for employees:
Employees receive more paychecks annually under biweekly pay schedules than under semimonthly ones. Stronger cash flow is the end result, which is perfect for paying bills, purchasing groceries, and setting aside money for retirement. Choosing biweekly compensation will probably result in happier employees than choosing semimonthly pay.
The following drawbacks of biweekly pay may lead some businesses to choose other pay schedules.
Variable pay dates:
Paychecks are delivered every other Friday because of biweekly pay; however, this fact does not automatically assign dates to payments. Paychecks are issued on the 15th and the 30th of each month, however these dates may be altered if they fall on weekends or federal holidays. Even with this need, you could still find that arranging when to conduct payroll is made simpler by these dates.
More payroll costs:
Biweekly pay plans might result in higher expenditures for you along with an increase in employee cash flow. This is due to the fact that certain payroll systems charge fees for each payroll that is processed. You could be tempted to choose semimonthly or monthly pay schedules in place of weekly or biweekly ones if your payroll service charges these costs. This lowers your expenditures and allows you to run payroll 2–14 times less frequently than with biweekly pay.
Complicated deduction calculations:
Splitting monthly deductions among various checks might be difficult when biweekly pay results in three payments within a given month. It’s simple to forget that you must divide the total monthly deduction by three rather than two. Instead, semimonthly and monthly pay schedules produce constant, predictable deductions every paycheck, saving you worry and lowering the risk of human mistake.
What are the best solutions to implement a biweekly pay schedule?
Payroll software is often the easiest option to start paying your staff biweekly. On these systems, setting up a biweekly salary plan is often simple. To add a pay schedule, you’ll go into your account, navigate to your payroll page, and seek for the option. Then, you may specify which of your employees you’ll pay according to this schedule. You may use this plan for your complete workforce, supposing that you pay everyone biweekly.
Certain firms, however, may pay some workers weekly and others every two weeks. For instance, you may pay hourly workers once a week and salaried workers twice a week. This strategy is not uncommon and aids lower-paid hourly workers in improving their cash flow. It accomplishes this while reducing possible expenses associated with additionally doing weekly pay runs for paid staff, who frequently have to wait longer for pay because their salaries tend to be greater.
In either case, the simplest method to manage a biweekly payroll schedule is through payroll software. This idea is especially valid if you select software that doesn’t charge you extra costs when you run payroll an infinite number of times. No matter how frequently you do payroll, according to our On Pay review, the firm never assesses fees. You’ll almost probably discover a payroll software choice that’s both practical and reasonable for establishing – and keeping – biweekly pay when you do your study.