When starting a new position, one of the first questions you'll want to know is how much you're getting paid. The next most frequent question is when you're getting paid. Understanding pay schedules can help you organize your money, create an adequate budget and make the most of added wages, like overtime hours. In this article, we discuss the differences between and advantages of semimonthly and biweekly pay schedules.
What is a pay schedule?
A pay schedule, or sometimes called a pay period, is the time worked between a set amount of dates. There are several standard pay schedules that organizations use, including weekly, biweekly, monthly, and semimonthly. Here is a brief introduction to these four common types:
- Weekly, in which a company pays their employees every week on the same day. For example, they pay you every Friday.
- Biweekly, in which a company pays their employees every other week on the same day. For example, they pay you every other Friday.
- Monthly, in which a company pays their employees every month on the same date. For example, they pay you on the 1st of every month.
- Semimonthly, in which a company pays their employees twice a month on the same dates. For example, they pay you on the 1st and 15th of every month.
Companies choose a specific pay schedule based on several factors, including industry, type of employee work and accounting costs. The two most common pay schedules for businesses across every industry are biweekly and semimonthly.
What is a semimonthly pay schedule?
If you're on a semimonthly pay schedule, you'll receive two paycheques per month, for a total of 24 throughout the year. Your employer will pay you in the middle of the month and on the last day of the month, or sometimes the first day of the next month. The two typical schedules are the 1st and 15th, or the 15th and final day of the month.
If you are a salaried employee on a semimonthly pay schedule, your employer may choose to divide your salary equally between 24 pay periods. Because the days within a month vary, and the days of work within each pay period differ, it's usually easiest for a company to divide your payments equally and provide a consistent paycheque.
For example, if your annual salary is $50,000, your employer may elect to split up your compensation equally between 24 pay periods. This would provide $2,083 per paycheque before deductions.
Suppose you are an hourly paid employee or a salaried employee whose company chooses not to divide your compensation equally. In that case, you will need to be prepared for slight changes in your paycheque on a semimonthly pay schedule. Depending on the number of hours you worked between the 1st and 15th, and 15th and the end of the month, your paycheque will vary with each pay schedule.
What is a biweekly pay schedule?
If you're on a biweekly pay schedule, you'll receive a paycheque every two weeks for a total of 26 paycheques throughout the year. Your employer will pay you every two weeks, typically on a Friday.
If you are a salaried employee on a biweekly pay schedule, your employer will probably choose to divide your compensation equally over the 26 pay periods. This is the same as being on a semimonthly pay schedule.
For example, if your annual salary is $50,000, your employer may choose to split up your payments equally between 26 paycheques. This would provide $1,923 per paycheque before deductions.
If you're an hourly paid employee, then your employer will compensate you according to the hours you work, including overtime, within every two weeks.
What is the difference between semimonthly and biweekly pay?
There are several critical differences between semimonthly and biweekly pay that include:
The number of paycheques per year
When your company's pay schedule is semimonthly, you will receive 24 paycheques per year. However, if they run a biweekly pay schedule, you will receive 26 paycheques per year. You make the same amount of money, but your employer divides the payments slightly differently.
Being paid on a date versus a day of the week
Being paid semimonthly means that the company pays on specific dates, such as the 1st and 15th or the 15th and end of the month. Conversely, if they operate biweekly pay, you will receive a paycheque on a particular day. Employers usually organize to release biweekly payments every other Friday, but they can set it up however they prefer.
The amount received each pay period
Because the pay cycles for semimonthly and biweekly payments are different, your pay will change according to the exact number of hours or days within each period. If you worked overtime or on a public holiday, the pay might differ significantly from your standard work hours.
What are the advantages of semimonthly pay?
Receiving a paycheque twice a month has several advantages, including:
Knowing that you will receive a paycheque twice a month on the exact dates, such as the 1st and 15th, allows you to create a consistent financial budget. You can anticipate exactly when you'll receive your money, which makes planning credit card payments easier. Online banking usually requires a date that you want to transfer your funds, and semimonthly payment makes that date very clear. For example, you'll know you'll have money in your account on or after the 15th. Because of this, you can plan mortgage, rent, or car payments easily and other recurring bills.
It becomes easier to predict your take-home pay when you know your deductions are divided equally between two paycheques. For example, companies typically deduct health insurance premiums, taxes or social club fees uniformly between the month's two pay periods.
More cost-effective for the company
There are several advantages for employees. But there are two major advantages of semimonthly pay for organizations, too. First, there are two fewer cheques to prepare every year, minimizing the payroll department's processing time and fees. Working with a semimonthly pay schedule makes scheduling payments more straightforward. It allows an accounting department to have no rollover from one month to the next that often occurs with biweekly schedules.
What are the advantages of biweekly pay?
Receiving a paycheque every two weeks has several advantages, including:
Knowing that you're being paid every two weeks on the same day can provide a sense of stability for your financial wellbeing. A biweekly pay schedule allows you to budget according to receiving money on the same day every week. For example, you'll know you'll have money to spend on the weekend if you're paid every Friday.
Two extra paycheques
Being on a biweekly schedule amounts to 26 paycheques a year. This is two more than received on a semimonthly plan. It doesn't amount to any extra money above your annual salary or a semimonthly schedule. However, many people use these two extra paycheques to pay off debt or add to their savings account. The amount on each paycheque is slightly smaller because it's spread out over a longer period, so it feels like there's more flexibility in spending.
More straightforward calculation of overtime pay
There are benefits to bimonthly payments for both employees and the organization. For example, the payroll department often finds it easier to calculate overtime pay when employees are on a biweekly pay schedule. Because they typically calculate overtime based on an entire workweek, there's never a need to split overtime between two pay periods. This can often occur with semimonthly pay schedules, which adds some minor complications to the payroll process.
Which pay schedules do different industries use?
Throughout all industries, biweekly is the most common pay schedule. However, specific industries or companies may prefer other schedules for particular reasons.
Construction, trades, and service industries like restaurants often pay on a weekly schedule. Because the hours of work can vary from week to week depending on the season, company's needs and projects, paying weekly allows the company to maintain a solid understanding of their employees' hours. Employees appreciate being paid weekly, as they receive a steady income for the work they completed the previous week. The downside for the organization is that weekly processing payroll often requires more resources to calculate paycheques and, if using a payroll service provider, can increase associated costs.
A monthly payment schedule is the least common pay cycle for any industry in Canada. Monthly pay schedules are common within the financial and banking sector and with high-income earners, such as corporate executives. High-wage companies prefer monthly pay schedules because the payroll department doesn't need to complete the process as frequently. This means it minimizes payroll resources so they can focus on other tasks, and reduces incurred costs. High-income earners prefer a monthly schedule because they can manage receiving just one paycheque per month.