Businesses have choices in how frequently they pay their employees through selecting specific pay schedules. Some choose to issue paychecks every week, while others pay employees just once a month. Most common, however, is semi-monthly pay or bi-weekly pay. We'll explain what semi-monthly paychecks mean, describe the differences between semi-monthly and bi-weekly pay, offer the advantages of receiving pay semi monthly, and highlight the preferred pay schedules for a few common industries.
What is semi-monthly pay?
With a semi-monthly pay schedule, your company issues your paycheck twice a month, every month. You’ll receive a total of 24 paychecks a year. If you’re a salaried employee, more than likely your employer divides your salary evenly over each of the 24 paychecks regardless of the actual number of workdays per pay period, since semi-monthly pay periods can vary in length by a few days. However, some companies do issue salaried employee’s paychecks by pay period, resulting in small differences in the amount of each check.
For example, if you’re a salaried employee earning $55,000 per year, and your company issues standardized paychecks throughout the year, your twice-monthly checks will each be $2,291 before taxes. You can count on that amount of money (minus any unpaid time you take off) in each paycheck. If your employer counts the number of hours per paycheck relative to your salary, some checks might be slightly more than $2,291 while other might be slightly less.
Hourly employees do not make a set figure for the year. For these employees, the frequency of semi-monthly checks is the same, but the pay amount will differ depending on the number of regular hours worked, overtime hours worked, and an unpaid time taken off, resulting in different check amounts each pay period.
Usually, semi-monthly checks are distributed on the same date each month. Most companies choose to provide checks on either the 1st and the 15th of the month or the 15th and last day of the month, though, in theory, the company could choose any two days to distribute the checks.
Semi-monthly pay vs. bi-weekly pay
Unlike semi-monthly checks, bi-weekly pay occurs every other week. Most months are just over four weeks long, which makes semi-monthly and bi-weekly pay seem very similar. However, there are some key differences between the two systems, including:
- Number of checks: Companies that use a bi-weekly pay scheme rather than a semi-monthly one issue two additional paycheck per year, for a total of 26 paychecks, over the semi-monthly’s total of 24 paychecks.
- Day vs. date: Bi-weekly pay occurs on the same day of the week, every other week. Many companies who use a bi-weekly pay structure provide checks on Friday. If you receive bi-weekly pay, you can expect a check every other Friday, or whatever day your company issues paychecks. Semi-monthly checks, by contrast, get issued on two specific dates each month and the day of the week you receive your check will change every month.
- Amount: The amount in each bi-weekly paycheck will be slightly lower than that of a semi-monthly paycheck for the same annual salary due to the two additional annual checks that the bi-weekly pay scheme provides. However, the total amount of money earned over the course of the year stays the same.
- Efficiency: Bi-weekly pay is more efficient for payroll preparers since they distribute checks on the same day every other week. However, there is occasionally the need for extra accounting for checks that cover the end of one month and the start of another. Conversely, paying employees twice a month can be trickier for payroll preparers since the day of the week they distribute checks varies every week. However, there are never any month-to-month pay conversions to manage.
Semi-monthly pay advantages
Twice-monthly pay offers some distinct advantages to those companies who choose to use it and for employees who receive it.
- Consistency: Since paychecks are issued on the same dates every month, it can help you plan for monthly expenses effectively. You can schedule credit card payment, rent or mortgage expenses, and other consistent payments based on the dates you get your paycheck every month.
- Cost-effective: Semi-monthly check schedules are more cost effective for companies than bi-weekly pay schedules. The accounting department has two fewer checks to administer each month and never has to worry about accounting for rollover from one month to the next, since each pay period starts and ends in the same month.
- Deductions: It’s usually easier for you to calculate monthly deductions from your paychecks, since every month results in the same number of paychecks, and usually the same amount of money in each check, with a semi-monthly schedule.
Preferred industry pay schedules
Many industries have pay schedules they prefer to use depending on the type of pay their employees receive, the amount of money included in the average paycheck, and the type of work they perform. Overall, bi-weekly pay is the most commonly used pay schedule, but others, like semi-monthly, are popular as well.
- Manufacturing and construction: Companies in construction, manufacturing, and even mining and natural resources generally prefer a weekly pay schedule to a semi-monthly or bi-weekly one. Often, their employees work irregular hours, predicated on the nature of the project and weather conditions, which could result in fewer hours some weeks and overtime hours other weeks. Administering paychecks every week makes it easier to manage those inconsistencies.
- Financial services: Many financial services companies and other high-paying sectors provide monthly checks, totaling 12 a year, rather than semi-monthly, bi-weekly, or weekly checks. Frequently, the salaried employees earn a substantial amount per year, making it easier for them to live on one check per month, since those checks are generally large.
- Food service: Businesses like fast-food restaurants and others that usually pay their workers a low hourly wage tend to provide weekly paychecks. This helps their employees better budget their money and account for any unpaid time off or overtime that might accrue during the pay period.