Once you have employees on your team, you can’t simply pay them whenever you want as long as they get paid. When you pay your employees matters as much as the amount you pay them.
Biweekly payroll is the most common way to pay employees. With this pay schedule, you pay employees on the same day every other week, resulting in 26 pay periods every year.
For many companies, this works out well; for others, biweekly payroll isn’t the best option. In fact, it can sometimes overcomplicate payroll, leading to errors and, ultimately, more work on your payroll team (or you, if you’re a multi-hat type of business owner).
Dig into this guide to understand the pros and cons of biweekly payroll and decide if it’s your best option.
When Biweekly Payroll Works Great
Biweekly pay is given to employees every other week, usually resulting in two paychecks per month. With a biweekly pay schedule, employees receive their checks on the same day, often a Friday.
So, for example, if you pay your employees on Friday the 4th of next month, they’ll also get a paycheck on Friday the 18th of that month.
This pay schedule creates 26 pay periods every year, so you’ll always know how many to expect. Although the number of pay periods can vary by month — some will have three instead of two — the number of annual pay periods doesn’t change.
Because biweekly payroll always falls on the same day of the week, it can make it easier for businesses with lots of hourly employees to manage their weekly schedules.
Hourly employees typically work week-by-week to earn their hours and may be subject to overtime for any hours past 40 they work in a week.
With a biweekly payroll, you’ll have cut-and-dry payroll start and end dates that include two weeks at a time, making calculating regular earnings, overtime, shift differentials, etc., worked within those two weeks simpler.
Plus, your pay periods always end on the same day to allow employees to get paid on the same day of the week. Say, for example, you pay your employees on Friday. You might end your pay periods on Monday to allow time to process payroll by payday.
Overall, biweekly payroll keeps things relatively predictable.
Another bonus to consider: employees like getting paid biweekly.
Biweekly pay allows employees to budget for their necessities and plan their money, thanks to a guaranteed two paychecks per month. When an extra paycheck hits two months of the year, it’s like employees get a bonus they usually don’t have.
When Biweekly Payroll Causes Problems
Despite being the most chosen payroll method, biweekly payroll isn’t the best option for all companies.
For example, salaried workers often get paid semimonthly rather than biweekly. It’s easier to figure out their pay for two checks per month compared to the occasional three checks in a month you’ll encounter with biweekly pay.
Although it’s possible to manage, it can also lead to calculation errors you could avoid by paying semimonthly. In fact, some businesses use semimonthly payroll for salaried workers while leaving hourly workers with biweekly payroll.
Employers also need extra cash reserved for payroll during the months with three paychecks. If you have five employees earning $2,000 per paycheck, you’ll need $10,000 more than you’d usually need to pay those employees during those extra-paycheck months.
As a large corporation, your extra payroll costs for those months could be astronomical.
Biweekly payroll may also be losing some popularity in favor of more frequent pay, like weekly or on-demand pay. As some workers feel the pressures of the economy, they might feel more comfortable knowing they’ll have another paycheck in one week instead of two weeks.
Alternatives to Biweekly Payroll
There are other ways to pay employees besides biweekly, and one of them could be more suitable for your business.
Semimonthly Payroll
Semimonthly payroll, also known as bimonthly payroll, is often the method used to pay salaried employees.
With semimonthly payroll, employees get paid twice a month. In contrast to biweekly payroll, semimonthly payroll isn’t always paid every other week on the same day of the week. Instead, it’s paid on two specific dates per month, like the 15th and 30th.
This results in always having two paydays per month, no more and no less, or 24 pay periods each year. Semimonthly payroll is more rigid and reliable in this way, preventing employers from having to budget for extra pay periods during some months as with biweekly pay.
Semimonthly pay makes paying salaried employees easier because their pay can be evenly split up into each month and pay period, rather than having to account for that occasional extra pay period that biweekly pay requires.
Salaried employees getting paid semimonthly also get larger paychecks, technically, because their pay is only split between 24 pay periods instead of 26.
When semimonthly pay becomes a problem is accounting for holidays, weekends, or other days affecting regular pay dates. For example, if payday usually falls on the 15th, but this month’s 15th lands on a Sunday, you’ll need to adjust accordingly. Usually, businesses end up paying the Friday before.
Also, semimonthly pay can result in odd cut-offs to a week, which makes things more complicated when calculating hourly employees’ pay, especially when figuring in overtime that relies on a weekly schedule.
Weekly Payroll
Weekly payroll triggers 52 payroll periods each year.
I’ll be honest in saying that weekly payroll is often better for employees than it is for employers, as employers have the onus of running payroll more frequently and eating the associated costs. Still, it’s an option that some find better than biweekly pay for their business.
Employees tend to enjoy weekly payroll because it means more frequent checks. Weekly pay comes on the same day of the week, every week, and there’s always a clear pay period start and end schedule, similar to biweekly pay.
Because of this, weekly pay also works best for hourly employees subject to overtime pay. It can be especially helpful for employees with irregular schedules, who can still rely on consistent income even if one week’s hours are much lower than another.
Monthly Payroll
If you have executives on your team, you might consider using monthly payroll for them—and for them only. Monthly payroll pays employees just one time per month, on the same date each month, for 12 pay periods a year.
Monthly payroll is rarely best for the average employee. But if you have high earners who make enough that getting paid once a month works for them, then it’s a possible option.
As an employer, you’ll run only 12 payrolls a year for monthly employees, which can reduce admin significantly. But if you have other employees on your team that you’re paying semimonthly, switching all salaried workers to that pay schedule probably makes more sense.
On-Demand Pay
On-demand pay is a relatively newer movement for employers. It’s not technically a pay frequency as much as it is a way to pay employees, but it still deserves a spot here for consideration.
With on-demand pay, your employee can request a portion of their pay before payday, usually using an app. You’ll still pay biweekly, semimonthly, or with whatever frequency you choose, and any early pay your employee requests gets deducted from their regular paycheck.
Making this option available can be invaluable to employees who live paycheck to paycheck and experience unexpected situations in which they need extra money before payday.
Combining a form of on-demand pay with your regular pay schedule is a simple way to give employees more flexibility with their pay, and it doesn’t result in too much extra work on the employer’s part.
Just be sure to make the proper adjustments to an employee’s pay before issuing their final paycheck, like deducting all withdrawals and withholding taxes on their gross pay rather than the portion left after their withdrawals.
To Pay Biweekly or Not to Pay Biweekly?
To sum up, biweekly pay often works well for hourly employees but isn’t usually the best option for salaried employees. Plus, accounting for an extra pay period during two months of the year can be tricky for employers.
There are other options, like semimonthly and weekly payroll, that could work better for you and your employees, both of which you need to consider when determining a pay schedule.
Whatever pay frequency you choose, think about adding a payroll service to your processes if you haven’t already.
Payroll services can do everything from calculating overtime pay to withholding the right amount of taxes for each employee, and the best services align with any pay frequency you choose.
