How is Bi-weekly Pay Calculated?
To calculate biweekly pay for an hourly employee, multiply the number of hours worked in a two-week period by the hourly rate. For example, 80 regular hours x $20 = $1600 biweekly pay. There are 26 biweekly pay periods in a year. To calculate biweekly gross salary, divide annual salary by 26.
State laws on bi-weekly require businesses to pay workers their wages at prescribed times and within certain timelines. While these laws instruct companies to pay individuals a certain minimum amount by a certain time, they also allow businesses to choose how frequently to pay their workers. Some businesses choose semimonthly, some choose bi-monthly, and many companies choose to pay their employees on a bi-weekly basis.
Bi-weekly pay appeals to human resource (HR) departments and payroll administrators. Why? This payment schedule cuts down on time spent on payroll processing and, in doing so, cuts down on the percentage of payroll errors and problems.
Bi-weekly payment schedules also make updating payroll records easier since the updates are more frequent and less involved. Issuing bi-weekly payments also help to make reconciliation easier by reducing the role of the Human Resources Department, which tracks all checks and ensures that all taxes are accounted for.
All in all, the bi-weekly payment method is easier to calculate for everyone involved compared to other payment schedules. However, this distinction does not mean that the bi-weekly payment schedule is right for all companies. For more information, please contact our California employment attorney for payroll issues.
What Are the Advantages of Paying Workers Biweekly?
Paying employees biweekly instead of weekly permits an employer to process payroll only once every two weeks. This reduces time spent on payroll processing, essentially cutting it in half to 26 pay periods from 52 paychecks if done weekly.
US employers have a lot of freedom when establishing their payroll calendars. They choose from monthly, bi-weekly, weekly, and semimonthly options and often land on the option that best suits employees and payroll departments.
While weekly payrolls produce employee checks each week, bi-weekly schedules pay out employees every two weeks.
Many employees enjoy being paid every two weeks. They find it easier to schedule their payment and deposit it, and they also like receiving a larger check. However, all workers are different, and we can find many employees who prefer other schedules.
Since offering bi-weekly payments streamlines the employers’ responsibilities and provides them with fewer transactions to keep track of, many employers favor the bi-weekly system. Here are some of the specific reasons that bi-weekly payments are popular.
Payroll processing includes regular wage calculations, overtime payment calculations, salaries, and additional payments such as overtime or bonuses.
Payroll workers also have to examine deductions, for example, payroll taxes. They also must look at voluntary deductions and other charges, benefits, taxes, and garnishments.
All of these considerations make calculating payroll a very involved process. However, when payroll issues one check every other week to employees, as opposed to once a week, they spend less time processing payroll per week and can focus on other things. Payroll employees are workers like everyone else, and if their job can become easier, why not make it so? Plus, payroll workers make fewer errors when payments go out on a bi-weekly schedule because they have smaller amounts to deal with and more time to do so.
Employees see benefits from bi-weekly payroll schedules as well. Workers can develop fewer checks annually and receive more money in each paycheck. Typically, employees say that the larger checks help them to pay bills more easily and budget more effectively. This schedule, then, helps workers save money.
While many workers prefer this system, switching payroll systems can disrupt employees’ schedules. When switching to a bi-weekly payroll system, employers should explain why they chose this and review the new schedule with workers before it begins.
Many businesses use payroll service companies for help processing their employee payments. These businesses pay fees for processing and sometimes pay extra per transaction. Paying workers on a bi-weekly basis lowers these payments and charges.
When companies pay less to these payroll providers and less for payroll courier services they may use, they save a certain amount per month, and that amount adds up to significant savings over the course of a payroll year. In short, bi-weekly payments reduce supplier fees and help the business save money.
All US employers must act by the federal government’s payroll laws. This necessity means that most companies print and file traditional paycheck registers to keep track of workers’ payroll data.
While some companies have begun to store this data digitally, most businesses still rely on traditional means of storage for hard copies. Filing systems take up space and cost money, but paying workers bi-weekly is one decision that cuts down on paperwork and data storage.
- Easier Reconciliation Process
The reconciliation process can be challenging, especially when weekly payroll schedules require companies to review and balance every issued check.
A bi-weekly schedule means fewer issued checks and fewer checks to track and balance against outstanding ones. This schedule means less work for payroll and an easier process overall.
What Are the Disadvantages of Bi-Weekly Pay?
The disadvantage of biweekly pay is that employees may receive less pay in a given pay check than on a monthly pay schedule. For example, an employee who makes $2000 per month will only receive $1000 per paycheck on a biweekly schedule. This may be a disadvantage for employees who cannot manage their expenses. Here are the main disadvantages of this payment system.
- Bookkeeping Grows More Complex: Bi-weekly schedules feature two months with an additional pay period. Going from two pay periods to three for two months makes things harder for the payroll department and makes it difficult for the company to make accurate cash flow predictions. Companies must prepare to pay their employees more for two months, and remember this scheduling change, too.
- Smaller Employee Paychecks: When compared to a bi-monthly pay schedule, employees must get used to smaller payment amounts. However, compared to weekly paychecks, bi-weekly checks are larger—plus, employees get two extra checks each year.
- Difficult Budgeting: Some employee struggle with budgeting when paid on a bi-weekly schedule, especially if they are not used to it. On the flip side, small businesses sometimes struggle with budgeting, too. For example, if a small business owner forgets that they have to pay workers three times over two months, the company could run out of money if they do not budget and plan properly.
- Potential Increased Costs: When comparing bi-weekly to bi-monthly, processing costs may increase for each payroll period. However, some payroll provider companies do not place a limit on payroll runs, so company owners should choose correctly and do their research.
What is the Main Difference Between Semimonthly and Biweekly Payments?
For semi-monthly, employees receive a paycheck 24 times a year (two times per month for 12 months, equaling 24 paychecks), whereas for bi-weekly employees are paid 26 times per year (every other week for 52 weeks in one year). A semimonthly payroll is paid twice a month, usually on the 15th and last days of the month.
As employers decide on the right payroll schedule for them, they wonder about the main differences between bi-weekly payments and another popular payment schedule, semimonthly payments.
The main difference between a semimonthly and biweekly payroll is that employers pay semimonthly paychecks twenty-four times per year instead of twenty-six times per year. Semimonthly payments are made twice per month, around the middle of the month (the fifteenth or so) and during the month’s last days. If the pay date coincides with a weekend, the payment will usually come on the Friday before the weekend.
On the other hand, payrolls considered biweekly are paid once every other week and typically on Fridays.
Is Biweekly the Best Payment Schedule?
Biweekly and semimonthly pay periods can be ideal for small businesses. A bi-weekly pay period delivers checks to your employees every other week on the same day, generally on Fridays.
Many offices have found a compromise as the debate continues regarding payroll schedules. These organizations find that utilizing a combination of payroll schedules works best for their employees and their payroll staff.
Therefore, the goal for most offices is to abandon the weekly payroll schedule and decide upon semimonthly, biweekly, or a combination of the two.
If an employer wants to switch their payment schedule from a weekly to a bi-weekly system, they should give workers advance notice. While some employees might balk at the change, most workers will understand if employers explain the benefits clearly.
The bi-weekly payment schedule offers the most benefits for companies and workers. However, payment schedules are subjective and dictated by the companies’ interests and the whims of their workers.
We hope this article helps you find out more about bi-weekly payment schedules, and choose the payment method and schedule that suits your business, and your workers, best.
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Brad N2024-04-17 12:42:082024-04-17 12:42:09How to Calculate FTE
