What is the bi-weekly payroll schedule?

Biweekly pay is a pay schedule where employees receive their paychecks every two weeks, typically resulting in 26 pay periods per year. This means that employees will receive a paycheck on the same day every other week, such as every other Friday.

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Bi-weekly payroll schedule

To calculate biweekly pay for a salaried employee, you'll need to follow 3 steps:

1. Divide the annual salary by 26. For example, if an employee's annual salary is $52,000, their biweekly pay would be: $52,000 ÷ 26 = $2,000
2. Subtract deductions and taxes. If the employee has $150 in health insurance premiums and $400 in taxes withheld each pay period, their biweekly pay would be: $2,000 - $150 - $400 = $1,450
3. The remaining amount is their net biweekly pay. In this example, the employee's net biweekly pay is $1,450.

Keep in mind:

If a salaried employee is exempt from overtime pay under the Fair Labor Standards Act (FLSA), their biweekly pay will remain the same regardless of the number of hours worked in a given pay period. However, if a salaried employee is non-exempt, they are entitled to overtime pay for any hours worked over 40 in a workweek, which must be factored into their biweekly pay calculation.

Is it the same as semi-monthly pay?

Biweekly pay is often confused with semi-monthly pay.

Semi-monthly pay means employees receive their paychecks twice a month, usually on specific dates like the 1st and 15th, resulting in 24 pay periods per year. The main difference is that biweekly pay occurs every two weeks, while semi-monthly pay occurs twice a month on specific dates.

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Semi-monthly payroll schedule

Key points of difference:

• Semi-monthly pay results in 24 paychecks per year, while biweekly pay results in 26 paychecks per year.
• Semi-monthly paychecks are usually larger than biweekly paychecks because the annual salary is divided by 24 instead of 26.
• Biweekly pay may result in two extra paychecks in some years, depending on the calendar.

Benefits of bi-weekly payroll

More frequent paychecks build trust

Employees appreciate getting paid more often. When they receive their paycheck every two weeks, it fosters a sense of reliability and security. This frequent payment schedule can increase employee satisfaction and loyalty, leading to higher morale and better overall productivity. Employees feel more connected and valued, knowing they won't have to wait too long for their earnings.

Easier to calculate overtime

Bi-weekly payroll simplifies the process of tracking and calculating overtime. Since you are reviewing two full weeks of work at a time, it's easier to identify and account for any extra hours worked. This reduces the likelihood of errors and ensures that employees are accurately compensated for their overtime, maintaining fairness and trust in the payroll process.

Fewer payroll errors

With bi-weekly payroll, the process becomes more streamlined, reducing the chances of making mistakes. Payroll staff have a more consistent schedule, allowing them to develop a routine and become more familiar with the process. This familiarity reduces errors compared to processing payroll weekly, where constant repetition can lead to rushed work and mistakes. Additionally, having two weeks of data at a time gives more opportunities to cross-check information, verify hours, and ensure everything is accurate before issuing paychecks.

Better budgeting and forecasting of salary expenses

A bi-weekly payroll makes budgeting and forecasting salary expenses more manageable. Since there are 26 pay periods in a year, it's easier to predict and allocate funds for payroll. This regularity helps employers plan their finances better, ensuring they have enough cash flow to cover payroll expenses. It also simplifies financial reporting and long-term financial planning.

Disadvantages of bi-weekly payroll

Higher payroll processing costs

Processing payroll every two weeks can lead to higher administrative costs. Each payroll cycle involves generating paychecks, handling direct deposits, and maintaining accurate records. Over a year, this can add up, especially for smaller businesses with limited resources.

More frequent payroll preparation

With bi-weekly payroll, your payroll staff will be busier. They will need to prepare and process payroll 26 times a year instead of 12 (for monthly payroll) or 24 (for semi-monthly payroll). This increased workload can lead to stress and a higher chance of mistakes if not managed properly.

Potential cash flow challenges

Paying employees more frequently can create cash flow challenges for some businesses. Employers need to ensure they have sufficient funds available every two weeks, which can be difficult if the business experiences irregular income. This requires careful financial planning and monitoring.

Complexity in payroll tax reporting

Bi-weekly payroll can complicate payroll tax reporting and compliance. Employers need to ensure they accurately withhold and report taxes every two weeks, which can increase the risk of errors. Additionally, reconciling these frequent payments with quarterly and annual tax filings can be more time-consuming and complex. Utilizing a global payroll platform like Thera can simplify this process by automating tax calculations and ensuring compliance across different regions.

Should you opt for a bi-weekly payroll?

Assess your industry and competition

When deciding whether to implement a biweekly payroll, it's essential to research the common pay frequencies in your industry and among your competitors. If most companies in your sector offer biweekly pay, adopting this schedule can help you stay competitive in attracting and retaining talent. Consider the expectations of your target workforce and how pay frequency might influence their decision to join or stay with your company.

Evaluate your cash flow and financial stability

Analyze your company's cash flow projections and financial stability to determine if biweekly payroll is feasible. Biweekly pay can help distribute payroll expenses more evenly, but it also requires a consistent cash flow to meet the more frequent payment obligations.

Ensure that your business has sufficient financial resources to support a biweekly pay schedule without straining your budget or hindering other essential expenses.

Consider your workforce demographics

Take into account the demographics and preferences of your workforce when deciding on a pay frequency. Hourly employees, particularly those in BPOs, or working as virtual assistants may prefer biweekly pay as it aligns with their work patterns and financial needs.

Startups offering services such as graphic design, content creation, or digital marketing can choose biweekly pay to accommodate a mix of salaried and contract workers, as well as to manage cash flow for project-based work.

On the other hand, salaried employees might be more accustomed to semi-monthly or monthly pay schedules. Talk to your employees to understand their preferences and consider how biweekly pay might impact their financial planning and budgeting.

Assess your payroll processing capabilities

Evaluate your current payroll processing systems and resources to determine if they can support a biweekly pay schedule.

Biweekly payroll requires more frequent processing, which may necessitate additional staff time, software upgrades, or outsourcing to a payroll service provider. Consider the costs and benefits of adapting your payroll infrastructure to accommodate biweekly pay and ensure that you have the necessary capabilities in place before making the switch.

Review local laws and regulations

Before implementing a biweekly payroll, thoroughly review the applicable local, state, and federal laws and regulations governing pay frequencies. Some states have specific requirements regarding the minimum pay frequency or the timing of pay periods. Ensure that your biweekly payroll structure complies with all relevant legal obligations to avoid potential penalties or legal challenges.

Partnering with a global payroll and hiring platform like Thera can help you navigate the complexities of international compliance, giving you peace of mind as you implement biweekly payroll. Hiring contractors, or employees in 150+ countries will take just a couple of clicks.

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