What is Semi Monthly Pay? Pros & Cons

Let’s assume that a company pays its employees biweekly on every other Friday. If a new employee agrees to an annual salary of $52,000 the employee will be earning $2,000 ($52,000 divided by 26 paydays) during each biweekly pay period. The employee’s pay records will indicate a gross salary of $2,000 each biweekly payday. When a semimonthly payroll is used, processing steps constantly shift around among different days of the week, since the pay date is not fixed on a specific day of the week. Deciding on a pay frequency for your small business is an important decision. Your pay frequency determines how often you process payroll and when employees receive their paychecks.

Deciding on a pay frequency for a small business is an important decision. Pay frequency determines how often the business must process payroll and when employees receive their paychecks. There are four common pay period options, including weekly, biweekly, semimonthly, and monthly. Two popular, yet easily confused, pay periods are biweekly and semimonthly. Knowing the difference between biweekly vs. semimonthly payroll can prevent financial setbacks, keep the business legally compliant, and more.

• When deciding on the frequency of payments to employees, the HR department should choose a frequency that benefits both the business and its employees.
• For example, banks and other financial services industries often elect for monthly paychecks since people in this profession earn higher than average salaries.
• The calculator assumes a working schedule of 40 hours and five days a week, but you can change it.
• Employees who are paid semimonthly always receive two paychecks per month.

The average income and size of the company has a huge impact on any decision to be made. Employees are paid at around the same time businesses make money, making it easier to pay employees on time. Choosing the right pay schedule is a crucial decision for any organization, be it a large enterprise or SMB. It can determine the type of talent you attract and the long-term expenses you incur as a business. The payroll function of a business is one of the most crucial functions of the HR department and the business as a whole. An efficient and organized payroll function can not only help a business reduce their costs but also help with motivating its employees.

Common semi monthly dates include:

Regular large paychecks given to employees may increase their productivity compared to employees receiving a smaller weekly wage. If the federal law exempts an employee that earns a salary, he/she is not entitled to overtime pay. In the same vein, an employer should not deduct any amount from the employee’s salary, except such deduction is permissible by the US Department of Labor. Something that happens every two weeks also happens twice in a month, so bi-weekly and semi-monthly are de facto synonyms.

A semi-monthly pay schedule means pay checks are distributed two times a month, usually on fixed dates such as the 1st and 15th, or the 15th and 30th. However, they may not necessarily fall on the same day of the week, and you would end up paying your employees 24 times in a year instead of 26. With semimonthly payrolls, businesses have to prepare their payrolls 24 times a year.

From the points listed above, you can deduce the importance of accurate record keeping. As an employer who intends to adopt the semi-monthly pay frequency, you must be diligent with record keeping. Rachel Blakely-Gray is a writer for Patriot Software, a provider of payroll and human resources management solutions for small businesses. The terms ‘bi-weekly’ and ‘semi-monthly’ are often mistaken for one another, so let’s break down the differences.

Simple to calculate

For many employees paid every weekly, their budget is based upon a predictable paycheck every weeks. Carefully evaluate the impact each pay schedule will have on your finances, time, and effort. Finally, select the pay schedule that makes the most sense to you. From an employers perspective, semi-monthly is preferable since there are two less paychecks per year for the company to prepare making it more efficient.

Similar to biweekly payrolls, indirect cost definition and meaning payrolls can also help the HR department of business reduce errors. This is because of the consistency in payments and their regular preparation. Furthermore, employees affected by these errors don’t have to wait until the end of the month to receive their compensation.

Preferred Pay Schedules By Industry

When deciding on the frequency of payments to employees, the HR department should choose a frequency that benefits both the business and its employees. Let’s pretend that Company ABC pays its employees semi-monthly, with its employees receiving their paychecks on the 1st and 15th of every month. An employee earning $100,000 per year will receive 24 paychecks of $4,166.67, less taxes. Other common types of pay schedules include weekly, bi-weekly, and monthly, with bi-weekly being the most popular. Semi-monthly pay is a salary or wage paid twice a month, usually on the 15th and last day but also on the first and 15th day.

• In a biweekly payroll, the employee will receive a different salary for two months of the year.
• While the other tasks of the HR department are equally as important, they are not as common as paying salaries and wages to employees.
• It comes from the Latin bi-, meaning twice, double, and weekly from the Old English word monað.
• Contrary to popular usage, bi-weekly does not mean twice in the same week.

For employees working on hourly rates, businesses can calculate their salaries according to their hours worked from the last time they got paid to the time of the payroll. The HR department of a business is responsible for making decisions regarding the payroll function of a business. The department makes these decisions in line with the overall view or strategy of the business.

Other Pay Schedules

Since payroll will be processed on a different day of the week, the person running payroll could lose track of that responsibility. Running semimonthly payroll can be particularly difficult to track when weekends and holidays come into play. Semimonthly payrolls are also more consistent as compared to biweekly payrolls. This is mainly because the employee receives a fixed amount of salary on each payroll date.

Though it is the most cost-effective option for employers, employees are forced to wait a whole month to receive each pay check. The major drawback is that due to the frequency of preparation of these payrolls, they are more costly. In a monthly payroll, businesses have to prepare the payroll 12 times a year, while in semimonthly payrolls, businesses prepare payroll 24 times. Theoretically, this can double the cost of payroll preparation for businesses. When an employer elects for a weekly pay schedule, employees get paid once per week, for example every Friday.

The cloud is poised to revolutionize Client Accounting Services (CAS). With a desktop system, bill payment and bookkeeping for a substantial number of clients is a daunting task. Getting invoices and source material, entering data, and printing and … Before finalizing the payroll schedule that best suits you, you may also consider some other types of payroll schedules. Keep reading this article to know what semi-monthly pay means and how to calculate it.

Now let’s assume that another company pays its employees semimonthly on the 15th day and the last day of every month. If it hires a new employee at an annual salary of $52,000 the employee will be earning $2,166.67 ($52,000 divided by 24 paydays) during each semimonthly pay period. The employee’s pay records will indicate a gross salary of $2,166.67 each semimonthly payday. Although, semi monthly pay period is one of the most common pay schedules. Semi-monthly pay periods are best suited for organizations with more than 20 employees. According to the Bureau of Labor Statistics, 36.5% of employees are paid biweekly.

Before zeroing in on your pay schedule, here are some factors that you must consider while evaluating your options. Although they are similar, semi-monthly and bi-weekly do not mean the same thing. Semi-monthly means twice per month and bi-weekly means every two weeks. Most of the time, these terms are interchangeable, but not always. Monthly is an adverb or adjective that means occurring once a month.

In a biweekly payroll, the employee will receive a different salary for two months of the year. There are 52 pay periods in a weekly pay scheduled compared to 24 pay periods in a semimonthly pay cycle. This reduces the number of paychecks paid to the employees annually. This way policies can be formulated to make the semi monthly pay schedules work for all employees, including those who prefer the traditional weekly payment schedule. With the semi monthly pay schedule, employees are paid between the 1st and the 15ths. Instead of waiting on a month to get paid, with a semi monthly payday, the employees’ paydays occur twice a month.

What is Semi Monthly Pay? Pros & Cons

Businesses operating a semimonthly payroll pay their employees two times a month. This means they pay their employees a total of 24 times within a year. Businesses can gain certain advantages due to operating a semimonthly payroll but may also have to face some drawbacks. However, some of these businesses have also adopted a more frequent approach to payrolls. These businesses believe that paying their employees more often can increase the motivation of employees which can also be beneficial for the business. Semi-monthly has two payments per month, i.e., paid twice a month on different days of the month with no interim pay periods included between them.

We calculate overtime based on the 7-day work period established by your employer. But it can sometimes get confusing to determine overtime on a semi-monthly payroll. Semimonthly is an adjective that is derived from the prefix semi-, which means half, part, partly, twice, as it comes from the Latin semi-, meaning half, and monthly. In the United States semimonthly may be used as a noun, the plural noun form is semimonthlies. Semimonthly is often found hyphenated as in semi-monthly, but the Oxford English dictionary only lists it as one word, unhyphenated. Remember, bimonthly may mean occurring twice a month or occurring every two months, semimonthly only means occurring twice a month.