Understanding How Biweekly Pay Works – The Complete Guide

When setting up a payroll system for your small business, one of the first and most important decisions you must make is to decide the pay frequency for paying your employees – weekly pay, biweekly pay, semi-monthly pay or monthly pay?

Important Note: Before you decide the pay frequency for your payroll, consider analyzing your state laws, employee needs and operational budget.

Based on the stats and popularity, bi-weekly pay is considered the most preferred option by many of the small business owners. According to the statistics published by the U.S. Bureau of Labor, 36.5% of private businesses tend to use biweekly pay as their preferred pay frequency.

What is Biweekly Pay?

Biweekly pay is one of the most commonly used pay periods by business owners and employers. Biweekly pay means you pay your employees on a set day, every other week. It allows the employees to manage their budget and expenses effectively.

How Many Biweekly Pay Periods are in a Year?

With this pay schedule, employees will receive 26 paychecks in a year or 27 in a leap year. Since payday occurs once every two weeks, some months will have three paychecks. So you need to be prepared for a couple of months where you have to pay your employees thrice.

Semi-Monthly vs. Biweekly Pay

On a biweekly payroll calendar, you have to pay your employees 26 times per year or 27 times if it is a leap year. On the contrary, you have to pay 24 times per year if you are following a semi-monthly pay schedule.

The paycheck amount may be lower in biweekly pay but your employees will receive them on the same day every other week.  If you set Monday or Friday as the payday, then your employees will receive them on the same day every other week.

This helps them in planning their finances and they will be extremely happy receiving paychecks on a defined day without any delay.

But in semi-monthly pay, if you choose to pay your employees on 15th and 30th of every month, there is a probability of paydays falling on holidays or weekend. So you need to ensure payroll is processed beforehand and your employees are paid on time.

Even though there are additional paydays in biweekly pay when compared to semi-monthly pay, you will end up paying your employees the same amount at the end of the year.

Benefits of Getting Paid Biweekly

• • When your employees receive paycheck more often in a month, they will be punctual and productive at work. It will also increase their morale and trust with the employer.
  • When compared to weekly pay, there are fewer chances for employees to run out of money before the next payday.
  • The biweekly pay will save business owners a significant amount of time and effort and minimizes the likelihood of payroll errors.
  • It also helps in calculating overtime since the majority of the workforce (78 million Americans) are paid on an hourly basis. So the employees will be happy about getting paid for their overtime at the earliest.

Cons of Bi-weekly Pay

• • Sometimes, it can be difficult for business owners when they have to pay three times in one month. They should have ample operational budget and planning.
  • It can add complexity to your monthly payroll deduction calculations because the first and the last pay periods of each month often span across two different months.
  • Since it has a couple of more paydays than semi-monthly pay, your payroll costs will be increased. If you outsource, then your payroll service provider might charge you for each pay run resulting in higher annual fees.

Learn how to calculate biweekly pay here.