A business depends upon its human resources. The entire infrastructure revolves around providing better work facilities that boost their abilities to produce better results. While many factors contribute to this, deciding on a pay period or payroll is crucial when paying your employees. It is the simplest way to satisfy those working for you. But what should be the frequency at which you pay your employees? Should it be weekly or biweekly pay? Monthly or semi-monthly?
The answer lies in what your workforce wants, the ease of HR payroll administrators, and state laws. Although biweekly pay is a popular choice, as outlined by the U.S. Bureau of Labour statistical report. It highlights that
Biweekly (36.5 per cent) is the most common pay period length by private businesses.
As this pay frequency becomes more preferred, this article gives you an insight into its basic framework.
In a biweekly pay, businesses pay employees every two weeks, on a set day. This makes for 26 paychecks yearly and 27 paychecks in a leap year. Since it is more frequent (as opposed to monthly or semimonthly pay), employees can better manage finances and regulate their expenses. It also builds to employee happiness and is, therefore, the most common payment system of choice by private businesses in the U.S.
If you have decided on a biweekly pay schedule for your employees, it means that you will give them paychecks once every two weeks, on a dedicated day. It might seem confusing, but it isn’t tricky at all.
Since a year has 52 weeks, there will be 26 paychecks in a biweekly pay schedule. As you decide to pay out on a set day after every 14 days, you will have to roll out salaries thrice some months. Have a look at the following calendar of January and February.
Following the biweekly payment plan, you pay thrice in the month of January every other Friday.
However, in February, you roll out two paychecks to your employees. From this breakdown, it is evident that the biweekly payroll frequency promises a paycheck every other week, the day and date of the month are insignificant. You must pay once every two weeks on the same day.
Some may think that the frequency of biweekly pay schedules is extra work. But, this payment system has its own set of benefits. Both the employees and the HR find it advantageous for the following reasons:
Apart from the benefits as mentioned earlier, the biweekly pay schedule has its disadvantages too.
In the end, choosing a pay period should entirely depend on your employees’ business feasibility and need. Additionally, when deciding on a payroll period you ought to take the HR team’s size into consideration, the availability of a budget payroll service provider and the types of waged employees (salaried or hourly workers).
The pay period is a vital element of the payroll system. It regulates and determines how often the employees will get paid.
It helps you decide what compensation your employees will receive and when. If you are starting a new business, defining a pay period is a significant element. There are many pay periods (each distinct from the other) to pick, and they come with their pros and cons.
If you choose to go with the biweekly pay periods, here is how it works.
Any employer who decides to go with the biweekly payment plan will roll out paychecks 26 times every year. However, this is not the case with leap years like 2020.
The year 2020 was a leap year. It means an extra day which indicates an additional pay period.
If it were not a leap year, the biweekly pay period calculation would have been much more straightforward. Calculate the number of weeks in a year- in a non-leap year it is 52- and divide it by two. It accounts for 26 biweekly pay periods.
Every year, there is at least one day of the year that appears 53 times on the calendar.
Simple maths: 365/7= 52 weeks & 1 day
Say that day is Wednesday. On the one hand, if you’re paid weekly, getting paid on a Wednesday would mean 53 paychecks. On the other hand, if you’re paid bi-weekly, it wouldn’t necessarily mean 27 paychecks in the same year, but over the course of two years, there would be at least 106 Wednesdays; meaning 53 paychecks over 2 years- 26+27.
A leap year has 366 days, which means two days of the week that occur 53 times. All this does is increase the probability of an extra payday for weekly & biweekly paycheck receivers.
Biweekly paycheck processing is done in the following steps:
When businesses choose to pay every other week, they have the liberty to decide on a set day. It can be a Friday, or a Monday or any other day. What matters is the 14-day payment cycle. But how do holidays affect this biweekly pay schedule?
If biweekly payday falls on a holiday, it is acceptable for businesses to credit employees’ bank accounts after the holiday has passed. However, as a good practice, most employers plan accordingly and choose to pay on the preceding business day.
More times than often, employers make the mistake of using biweekly and semimonthly/bi-monthly pay periods interchangeably. Though they sound similar, there lies a difference between the two.
In a semimonthly pay period, you pay your workforce twice every month on a dedicated date. For example, you may decide to roll out paychecks semi-monthly on the 15th and the 30th. If either of these dates falls on a weekend, the pay is rolled out on the preceding Friday. In a biweekly payroll system, the paychecks recur after every 14 days, irrespective of the day of the month. Therefore, in the calendar (of January and February depicted above ), it can be seen that employees receive paychecks on the 3rd, 17th, 31st, 7th and 21st.
The significant difference between a semi-monthly and a biweekly payroll is that there are 24 paydays in a semi-monthly period and 26 in a biweekly one. Depending on the number of payrolls per year, the semi-monthly payroll is efficient and hence, preferred. But employees like being paid twice each month as it suits their budget and financial management.
Bi-monthly or semi-monthly pay periods are the same and occur twice every month. It is much feasible to calculate overtime pay in a biweekly payroll as compared to a bi-monthly or a semi-monthly.
As explained above, the most significant difference between the two is in the number of payment cycles- constant for bi-monthly and variable in case of biweekly.
Such knowledge isn’t just necessary for individual receivers of paychecks but also for company HR managers. It becomes a pivotal part of the overall decision-making regarding how many people stay on the same pay cycle. It also helps manage the monthly salary budget.
Sometimes employers stick with the biweekly payment plans. Sometimes, they adjust the individual paycheck amounts to account for the extra cycle, so that the entire burden of the extra payday does not fall on one pay period. In such cases, the HR managers’ job is to inform the employees that their paychecks’ adjustment is temporary and that it shall return to normal the following year.
However, in biweekly payments, this concern does not exist for HR managers, as employees only need to get paid twice a month. That makes it 24 payment cycles in a year.
For the ease of understanding, some employers distribute biweekly payroll calendars. It is a much simpler way to comprehend the company’s payment system. Use different colours on the calendar to mark payroll start and end date, yearly paydays and due dates.
Deciding a pay frequency is crucial for businesses and needs to satisfy parameters about the state laws, employee needs, and operational budget. Before you go for a monthly, semi-monthly or a biweekly pay schedule, it is worthwhile to consult your HR team. While some pay schedules like biweekly may be convenient for employees, others like monthly or semi-monthly offer smoother calculations on the managerial end. Therefore, it is required to trace the pros and cons of each.
To simplify the process, employ a consolidated payroll manager like CuteHR to the rescue. Its attendance and leave manager has an integrated payroll and invoice feature. It diligently allows you to track and prepare employee paychecks while focusing on your business’s more significant aspects.