Understanding Bi-Weekly Payroll: A Guide For HR Professionals
When it comes to payroll cadence, bi-weekly payroll is a popular choice among businesses. It offers some important benefits for scheduling and structure of pay and is one of the easiest ways to calculate payroll.
In this article, we’ll dig into some of the benefits of bi-weekly payroll as well as best practices.
(This article will only make sense if you have already covered the basics. Start by understanding how payroll software works.)
What Is Bi-Weekly Payroll?
Bi-weekly payroll refers to the process of paying employees every two weeks, typically resulting in 26 pay periods per year.
This system contrasts with other payroll schedules, such as weekly, semi-monthly, or monthly. The bi-weekly approach has a rich history and is widely adopted across various industries due to its balance of frequency and manageability. Bi-weekly payroll can be easily managed with an automated payroll management system that tracks payment cycles.
According to the Department of Labor, the three most common industries which use bi-weekly pay are information services and technology, leisure and hospitality and education and health services.
Difference between bi-weekly and semi-monthly pay
Bi-weekly, as mentioned before, means that you pay employees every two weeks. This can happen on a day of the week of the companies choosing.
It’s possible that employees can be paid three times in a month depending on when the how early in a month the first pay day occurs.
Semi-monthly pay simply means twice per month. This sort of pay usually occurs on the first and the fifteenth of each month, meaning pay periods may vary in length depending on the month.
What Is Bi-Weekly Payroll Used For?
Put simply, a bi-weekly pay schedule is put in place to streamline the process of managing employee salaries and wages.
It plays a vital role in ensuring compliance with labor laws and tax regulations while also aiding in employee satisfaction and financial planning.
Regular and predictable paychecks help employees manage their finances more effectively. For this reason, it's one of the more popular choices for a payroll cadence, even if the payroll has one employee.
Which industries use bi-weekly payroll?
According to the Bureau of Labor Statistics, around 36% of US businesses opt for biweekly pay. The Department of Labor (DOL) identifies the top industries using this pay schedule as:
- Education and health services
- Leisure and hospitality
- Information
Before deciding on a pay frequency, review your state’s payday requirements on the DOL website, as some states mandate more frequent pay intervals.
What Are The Benefits Of Bi-Weekly Payroll?
The consistency of bi-weekly pay makes it easy for employees to understand and predict what they’ll receive in terms of funds.
For hourly workers, how you calculate overtime pay is somewhat simplified. This also makes payroll initiatives such as on-demand pay much simpler to manage.
Some primary benefits of biweekly payroll include:
- Predictability: Offers consistent pay schedules for employees and employers, making any budgeting process simpler.
- Simplified Time Tracking: Easier calculation of regular and overtime hours.
- Enhanced Cash Flow Management: Allows businesses to better manage financial resources.
- Cost Efficiency: Potential reduction in payroll processing costs due to fewer pay periods compared to weekly payroll.
Small businesses can further enhance these benefits by utilizing top-rated payroll services for small enterprises.
Bi-weekly vs other pay cadences
Other pay period options include:
- Weekly - While this can improve cash flow management, weekly pay can demand more time and resources. They are ideal for businesses equipped to handle frequent payroll runs.
- Monthly - While these are the easiest to manage, monthly pay periods can be challenging for employees who prefer more frequent payments for budgeting. While they reduce administrative work, it’s important to assess if this schedule suits your workforce and complies with state laws and industry standards.
- Semi-monthly - With payments typically made on the 15th and the last day of the month, semi-monthly payroll offers predictable pay schedules and reduced administrative burden compared to bi-weekly pay. However, it can cause budgeting challenges for employees as paydays are not always evenly spaced throughout the month.
What Are The Challenges?
Managing a bi-weekly payroll system is not without its challenges. These include:
- Complexity for Different Employee Types: Varying needs of full-time, part-time, and freelance staff as well hourly and salaried employees.
- Regulatory Adherence: Compliance with state and federal payroll laws and rules about overtime pay.
- Risk of Payroll Errors: Requires accurate record-keeping to prevent mistakes.
- Holiday and Closure Adjustments: Managing pay during holidays and business closures.
Best Practices for Implementing Bi-Weekly Payroll
As you put a bi-weekly pay cadence in place, there are few practices that will ensure a smooth transition and help your organization meet any compliance requirements as you scale.
- Training and Education: Educate HR staff and employees about payroll management systems and tools.
- Regular Audits: Conduct audits to ensure accuracy and compliance.
- Software Selection: Choose a payroll software solution that fits the business size and needs. Any payroll software costs are justified if the right tool leads to fewer payroll errors.
- Standardized Process: Follow a payroll processing step-by-step guide to ensure accuracy.
Best Payroll Software for Bi-Weekly Pay
To give you an idea of the best payroll software on the market, all of which can easily accommodate a bi-weekly payroll schedule, we’ve provided a shortlist below on some of our top choices for payroll solutions.
Bi-weekly Pay Schedule for 2024
Assuming that the bi-weekly pay period started on the first Friday of the year and continues every two weeks thereafter, there will be 26 pay periods per year. The following is a bi-weekly pay calendar for the year 2024.
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