What is biweekly pay?
Biweekly pay is a method of payment where an employee receives their wages on a two-week basis.
Each pay period spans a period of 14 days and always begins and ends on the same days of the week. This means that there will be approximately 26 pay periods in a year, plus or minus a fraction of a pay period, as years do not begin and end on the same dates.
All hours an employee works are tracked within the 14-day span of the pay period and paid out the following week. Overtime is also tracked on a weekly basis that generally syncs with the pay period's start date.
How to calculate biweekly pay
To calculate biweekly pay, all hours that an employee has worked between the defined start and end time this time are documented and tracked. This can be done through a timesheet or other tracking methods, such as punch cards or automated systems.
The hours are then multiplied by the employee's hourly pay rate to determine the total wages due for that period. If an employee works over 40 hours in a week, then overtime is also factored in.
For example, take an employee earning $20 per hour and working 50 hours in the first week. They would earn $800 for the first 40 hours and $300 for the 10 hours worked over the 40 hours, as this would be paid at time and a half (1.5). The employee would therefore earn $1,100 for the first week.
If the employee then worked only 30 hours in the second week, they would earn $600. That is a total of $1,700 for the biweekly pay period.
Here is the example biweekly pay calculation:
40 x $20 = $800
10 x ($20 x 1.5) = $300
$800 + $300 = $1,100
30 x $20 = $600
Week 1 + Week 2 = $1,100 + $600 = $1,700
How does biweekly pay work?
Once the payroll period has ended, the payroll practitioner will determine the total payments each employee is due, as well as any withholdings that need to be done for state and federal taxes, insurance premiums, or any other applicable deductions.
Payment will then be issued to the employee by the end of the week following the close of the pay period. As there are 26 biweekly pay periods in a year, there will be two months when employees will receive three payments.
Semi-monthly versus biweekly pay periods
While biweekly pay means paying employees every two weeks, semi-monthly periods divide each month into two periods, usually from the 1st through to the 15th, and then from the 16th through the end of the month.
However, a variant also exists where the first period is defined from the 1st through the midpoint of the month (say, the 14th in February) and then from the next day through to the end of the month.
In practice, there are 26 biweekly pay periods in a year and 24 semi-monthly pay periods.
Although it may be more work to manually define pay periods in this manner, it also leads to more consistently sized payments on the employee's end.
If employees frequently work more than 40 hours a week, they may need to be educated on how the overtime week will be calculated as it is always done so using the same days of the week (e.g. Monday through Sunday) and the calendar days that the pay period runs has no bearing on whether they receive overtime.
What HR should know about biweekly pay
There are a number of advantages and disadvantages for both the organization and the employee when adopting biweekly pay that HR should consider:
Advantages for the organization:
- Lower administrative costs as payroll is easier to manage than other pay periods.
- Greater control of budgeting as cash outflows are more predictable.
- More streamlined payroll processes with fewer manual entries and calculations needed between cycles.
Advantages for employees:
- Receiving wages every two weeks can make it easier to handle bills and budget finances in the short term.
- Automatic deductions such as insurance premiums are taken care of on each payday, reducing paperwork for employees who have multiple policies through work.
- Overtime calculation is much more intuitive and easier for employees to understand with a biweekly period compared to a semi-monthly or monthly pay period.
Disadvantages for the organization:
- Payroll processing costs may be higher due to more frequent transactions compared to semi-monthly periods.
- The end of the year will likely fall in the middle of a biweekly pay period, which can make yearly calculations that begin as of January 1st complicated.
Disadvantages for employees:
- Employees still receive payment less frequently compared to a weekly pay period.
- The uneven distribution of pay periods throughout the year may provide a challenge for employees to budget, as they may rely on the "three pay period month" to get them into the clear.
Biweekly best pay practices
When an organization is considering implementing biweekly payments, there are a few things they should consider.
The first is to ensure that employees are properly informed of the change. Employees should be made aware of the advantages and disadvantages associated with biweekly pay periods before payroll processing begins. This will help to ensure that any questions or concerns can be addressed upfront and will help foster trust between employer and employee.
Additionally, when informing employees of the change, it is important to clearly explain the benefits of biweekly payments for them, and creating a list of frequently asked questions will help allay any concerns they might have.
You also want to ensure that employees have as much advance notice as possible before you make any changes to pay periods so they can make any changes they need to in their own finances to prepare for the switch.