A biweekly pay period is a common employee payment setup for small businesses. Setting employee payments to occur automatically every two weeks streamlines your payroll operations and ensures that your employees know when to expect their paychecks.
There are many other reasons biweekly pay schedules are common—and there are also many reasons that people sometimes confuse them with semimonthly pay schedules. Let’s get into the differences between the two—and the advantages of biweekly pay—below.
What is a biweekly pay schedule?
While it may seem obvious from the name, it’s important to understand what the phrase “biweekly pay schedule” actually means for your payroll. Employers who implement a biweekly pay schedule pay employees every other week.
The most important thing to remember when choosing a biweekly pay schedule is that you will end up with 26 pay dates in a year. If you decide to implement a biweekly pay schedule, you can expect there to be a couple of months that have three pay dates in them.
What is the difference between semimonthly pay and biweekly pay?
When it comes to pay schedules, you may have seen the term “semimonthly” as often as—if not more often than—the term “biweekly.” Contrary to popular belief, a semimonthly pay schedule and a biweekly pay schedule are not the same thing.
Let’s look back at our definition of a biweekly pay schedule to better understand this distinction. We’ve mentioned that, since a biweekly pay period means that paydays are separated by 14 calendar days, there are some months during which you’ll have three paydays.
For example, if your first payday falls on the first of the month, then (unless it’s February) you’ll also have two more paydays that month—one on the 15th, and another on the 29th. This case demonstrates how biweekly and semimonthly pay schedules differ.
As you might be able to tell from this example, there are different numbers of semimonthly and biweekly paydays per year. Semimonthly paydays occur twice monthly, and there are 12 months per year, so there are 24 paydays per year in a semimonthly setup. Biweekly paydays occur every two weeks, and there are 52 weeks per year, so there are 26 paydays per year in a biweekly setup.
This difference in the number of paydays per year is a major difference between semimonthly pay and biweekly pay, but it’s not the most immediately visible distinction between the two (hence the everlasting prevalence of questions about how the two schedules differ). Instead, the most obvious difference is in how much money salaried employees are paid per pay cycle.
You should also keep in mind that if you pay your employees on a semimonthly basis, you must designate two dates per month to issue payments, such as the 15th and the 30th. If these dates fall on a weekend or holiday, you should move up the payday to the business day after the weekend or holiday. If you choose a biweekly pay period instead, you’ll issue paychecks every two weeks on the same day of the week, unless the usually scheduled payday is a holiday—in that case, move up the paycheck to the business day before the holiday.
Which pay schedules do different industries use?
Semimonthly and biweekly pay are the most frequent pay schedules used across a number of industries. Whether your small business is a marketing firm, consulting agency, private tutoring group, or something else, your industry likely sticks to semimonthly or biweekly pay periods.
However, some industries are known for maintaining shorter or longer pay periods on their payroll calendars. For example, retail workers often receive weekly paychecks whereas, in finance, monthly paychecks are common since employees can easily get by on their earnings from just one paycheck.
Advantages of biweekly pay
A biweekly pay period has the following advantages over a semimonthly schedule:
Payroll processing is consistent and predictable, so your admins have an easier time running and reviewing payroll.
Employees know when they’re getting paid. If your employees receive paychecks every other Thursday, for example, it will be easier for them to plan their personal spending accordingly. Furthermore, a set schedule like this is less likely to be bumped for a weekend or a holiday, as it may be for a semimonthly schedule.
Easier payments to hourly employees. Opting for a biweekly pay period will make your payments to hourly workers far easier to calculate. That’s because a biweekly pay period always encompasses two workweeks, which will amount to 80 hours (plus overtime, if applicable) under most circumstances. An hourly employee’s biweekly paycheck amount is just 80 employee hours multiplied by their hourly pay rate—easy! Some semimonthly pay periods, on the other hand, will encompass 12 workdays and others 13 workdays, making it more difficult for employees (and your payroll processor) to manage.
More efficient overtime tallying and payments. Biweekly pay periods make overtime pay a breeze, too. If you operate on a biweekly pay schedule and see that one of your nonexempt employees worked 82 hours during the pay period, you know you have two hours to pay as overtime. For more on overtime pay, check out our guide to each state’s overtime payment laws.
Employees earn more for some months. If it’s one of those lucky months when your biweekly paydays fall on the 1st, 15th, and 29th of the month, then your employees get not just two paychecks this month, but three. And those three-paycheck months are always nice for employees who appreciate the extra money that month.
Disadvantages of biweekly pay
Here are some downsides of biweekly pay compared to a semimonthly payroll schedule:
You need to plan ahead for the two months of the year that have three paychecks. That means potentially shuffling cash flow, tightening your budget, making sure payroll lines up with your monthly balance sheets, and spreading out percentage-based benefit deductions correctly.
Payroll costs could increase—you might get charged slightly more to process payroll 26 times a year versus 24 times.
How to decide whether to set up a semimonthly or a biweekly pay schedule
While the differences are slight, choosing a semimonthly or biweekly pay period can drastically impact your payroll operations. Biweekly pay periods may be better for your business if you have hourly employees, often pay overtime, or just need to issue smaller payments with each paycheck. And just as certain industries primarily pay their employees weekly, if you see that most businesses in your sector use a biweekly schedule, then it’s a schedule your employees might expect—after all, what works for others in your industry just might work for you, too.
FAQs
Is biweekly pay better than weekly or semimonthly pay?
Biweekly pay tends to be the gold standard of pay schedules for both business owners and employees. A biweekly frequency gives employees consistent paychecks (two a month on average) without overloading employers with weekly payroll admin. Though a semimonthly schedule is pretty similar to a biweekly one, semimonthly spreads employee pay across 24 paychecks throughout the year, whereas biweekly offers employees 26 paychecks (for two months of the year, employees get three paychecks).
How does a biweekly pay schedule affect overtime calculations?
A biweekly pay schedule doesn’t affect overtime calculations. As an employer, you calculate overtime on a weekly basis—overtime is anything over 40 hours in a fixed, seven-day period. Then you’ll pay out that overtime in an employee’s regular paycheck at the end of the 14-day biweekly pay period.
How should employers handle benefits deductions in biweekly payroll?
With a biweekly payroll schedule, employers need to make sure they’re adjusting benefit deductions to account for the two months a year when employees receive three paychecks instead of two. In general, employers should take percentage-based deductions, like 401(k), from every paycheck, but just adjust the amount during the months with three paychecks. For benefits that have a flat rate (like health and dental insurance), it’s common practice to spread the deductions out over 24 paychecks—meaning two of the 26 total paychecks won’t have a benefit deduction attached.
Are there state laws that restrict or require biweekly pay schedules?
Most states have minimum pay frequency laws that require employers to pay their employees at least on a biweekly or semimonthly basis. States that require employers to pay employees on a biweekly frequency include California, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Virginia, and West Virginia. Meanwhile, Rhode Island, Vermont, and New York (for certain types of workers) all require employers to adopt weekly pay.
How do biweekly pay schedules impact cash flow for small businesses?
Biweekly pay schedules give employers a bigger cash flow buffer than weekly pay schedules, while also cutting down on administrative time. Employers just need to plan ahead for the months when they’ll be cutting three paychecks in a 30-day period instead of two.
