Biweekly Pay
What is Biweekly Pay?
Biweekly pay describes when employees are paid every other week on a specific day of the week. For example, if you want to establish a biweekly pay schedule, you might choose to pay your employees every other Friday. Since every calendar year has 52 weeks, this results in a total of 26 paychecks per year.
What Are the Benefits of Biweekly Pay?
Biweekly pay is advantageous for both employees and HR.
For employees, biweekly pay helps them:
- Budget their finances more easily since they receive a paycheck on the same day every other week.
- Feel more secure with a set pay day as opposed to a pay date, which can be on any day of the week (as with semi-monthly paychecks).
For HR, biweekly pay helps:
- Save time and reduce the chances of making payroll errors (compared to weekly payroll processing).
- Calculate overtime pay more easily (compared with semi-monthly pay), since overtime is based on a workweek.
- Save money if your payroll provider charges you for every payroll run (if you are moving from a weekly payroll schedule).
Which Industries Use Biweekly Pay?
Over 36% of US businesses pay their employees biweekly. According to the Department of Labor (DOL), these are the three industries that most commonly use biweekly pay:
- Education and health services
- Leisure and hospitality
- Information
Before making any decision about how often you pay employees, check your state’s payday requirements from the DOL as some states require more frequent pay intervals.
What Is the Difference Between Biweekly and Semi-Monthly Payrolls?
The key difference between biweekly and semi-monthly pay lies in how often pay dates occur. Biweekly pay dates occur every other week, and semi-monthly pay is paid out on two specific dates a month (e.g. every 5th and 20th of the month).
Other significant differences include:
Biweekly Pay
- There are 26 pay periods per year.
- Employees are paid on a specific day, e.g. every other Friday.
- Pay is every two weeks.
- Overtime is easier to compute.
- The cost of payroll is potentially higher and bookkeeping may be more complicated because of the additional pay periods.
Semi-Monthly Pay
- There are 24 pay periods per year.
- Employees are paid on specific dates, e.g. the 5th and the 20th.
- Pay is twice per month.
- Overtime may be more complicated to compute if extra hours fall between different semi-monthly pay periods.
Are There Disadvantages to Biweekly Pay?
A biweekly pay period is generally a good option for businesses, especially those with a mix of hourly and salaried employees. However, it’s beneficial for any company to consider all the angles before deciding on a payroll schedule. The following are several drawbacks to a biweekly pay period:
- Bookkeeping can be complicated because two months each year have three pay periods.
- Company budget must account for these three-period months.
- Costs can be higher if the payroll provider charges per payroll run.
Does Biweekly Pay Affect Taxes?
An employee’s tax liabilities won’t be affected by the length of their pay period. Total tax liability is based on the total amount earned in a year rather than on paycheck frequency. The same is true for payroll taxes on the employer’s end.
The taxes taken out of each paycheck will be different for weekly, biweekly, and monthly pay periods, but the overall amount ends up the same.
How Is Biweekly 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. If employees want to check their hourly rate based on their gross pay, they simply divide the payment amount by the total number of hours worked.
For example, a worker who earned 2,000 dollars and worked 80 hours in two weeks has a rate of 25 dollars per hour, since 2,000 ÷ 80 = 25.
For salaried employees, pay is often based on a set annual amount. Thus, an employee with a fixed salary of 50,000 dollars will get a paycheck of around $1,923.08 biweekly since the gross annual salary will be divided by 26 paychecks (50,000 ÷ 26 = 1,923.08).