Bi-monthly vs. Bi-weekly Payroll: Understand the Pros and Cons
Beyond affecting how and when employees receive their pay, choosing the right payroll schedule also redefines how efficient your payroll management and your financial planning will be. Two of the most common options are bi-monthly and bi-weekly payroll, each with distinct advantages and drawbacks.
Bi-monthly payroll, also known as semi-monthly payroll, means employees are paid twice a month on fixed dates, such as the 1st and 15th. Bi-weekly payroll, on the other hand, occurs every two weeks, usually on a set weekday like Friday, which leads to 26 pay periods per year instead of 24. In the private sector, bi-weekly pay is the most prevalent choice of payment in the United States. While both methods let employees receive their earnings on a regular basis, they differ in terms of pay frequency, consistency, and slightly on administrative details.
In this article, we’ll break down the pros and cons of each payroll type, key differences, and factors to consider when choosing the best option for your business and employees.
What is a Bi-Monthly Payroll?
Bi-monthly payroll, also called semi-monthly payroll, is a payment schedule where employees receive their wages twice a month. Typically, businesses process payroll on fixed dates, such as the 1st and 15th or the 15th and last day of the month. This means employees receive 24 paychecks per year instead of the 26 they would receive under a bi-weekly schedule.
Key Features of Bi-Monthly Payroll
One key feature of bi-monthly payroll is fixed pay dates. Under this system, employees always know their paychecks will arrive on the same two dates each month, but since these dates can fall on different weekdays, the gap between paychecks might not always be the same.
Another advantage is how well it aligns with monthly expenses. Many businesses prefer this schedule because it smoothly matches fixed costs like rent, utilities, and other bills that are usually due once a month.
Still, the length of each pay period can fluctuate. Since months don’t have the same number of days, the time between paychecks can vary slightly. This can make it harder for hourly employees to track their earnings.
Is the semi-monthly pay schedule the same as the bi-monthly?
Yes, semi-monthly or twice a month is the same as bi-monthly. Actually, the Current Employment Statistics survey calls the pay method “semimonthly,” with no hyphens.
Common Industries Using Bi-Monthly Payroll
Bi-monthly payroll is a popular choice in industries where salaried white-collar employees make up most of the workforce. According to the 2023 CES survey, the information, financial and professional services sectors were the industries where bi-monthly pay was most prevalent.
For instance, finance and accounting businesses often use this schedule because it lines up well with budgeting and financial planning cycles. Corporate and Professional Services companies, like law firms and consulting agencies, also favor bi-monthly payroll as it provides predictability while also reducing administrative workload. Som government offices also pay with this method.
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What is a Bi-Weekly Payroll?
Bi-weekly payroll means employees are paid every two weeks, usually on the same weekday, such as every other Friday. This results in 26 pay periods per year, which is slightly more than the 24 paychecks in a bi-monthly schedule.
Key Features of Bi-Weekly Payroll
One of the biggest advantages of a bi-weekly payroll is its consistent pay schedule. Employees can expect their paycheck on the same weekday every two weeks and, thus, easily plan their finances.
Another feature is the higher number of pay periods. Since there are 26 pay periods in a year, employees receive two extra paychecks compared to those on a bi-monthly payroll. This can either be a benefit or a problem when budgeting. Some accountants might find having more pay periods relieving for their cash runway, but going this way may require businesses to account for additional payroll runs.
Common Industries Using Bi-Weekly Payroll
Bi-weekly payroll is commonly used in industries with both salaried and hourly workers, as it offers predictable pay periods that align well with work schedules.
The CES shows that retail and hospitality businesses, for example, often prefer bi-weekly payroll since it accommodates fluctuating hours and overtime more efficiently. Healthcare and manufacturing industries also favor this schedule. Some small businesses tend to use bi-weekly payroll too, because it balances frequent pay for employees with manageable payroll processing costs.
Are bi-weekly and bi-monthly pay periods common enough?
Many workers from other countries are surprised to learn that, in the United States, colleagues get paid every two weeks or every week. So if you're reading this from abroad, and you wonder if these payment methods are common enough, yes, they are, according to the U.S. Bureau of Labor Statistics.
Key Differences: Bi-Weekly vs Semi-Monthly Payroll
Let’s now take a minute to look into the main differences of each payroll method.
Pay Frequency
The most obvious difference between the two schedules is the number of paychecks issued each year. Bi-monthly payroll results in 24 pay periods, while bi-weekly payroll has 26. As we’ve established, this means employees on a bi-weekly pay schedule receive two extra paychecks annually.
Payment Consistency
Bi-weekly payroll provides a consistent paycheck on the same weekday every two weeks, which makes it easier for employees to budget. In contrast, bi-monthly payroll follows fixed calendar dates, which means the time between employees' paychecks can vary from one pay period to the next.
Payroll Management
From an administrative perspective, bi-monthly payroll requires fewer payroll runs, which can reduce processing time and costs. Even so, it can be trickier for businesses that employ hourly workers, as pay periods don’t always align with workweeks. Bi-weekly payroll, while requiring more frequent processing, often makes it easier to calculate wages and overtime since each pay period covers a standard two-week timeframe.
Tax Calculations
Tax withholdings and deductions may differ slightly between the two schedules. Since bi-weekly payroll results in more pay periods, individual paycheck amounts are typically smaller, which can impact the way taxes and benefits contributions are spread throughout the year. Bi-monthly payroll, with fewer pay periods, may lead to larger individual deductions per paycheck.
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Pros and Cons of Bi-Monthly Payroll
One of the biggest advantages of a bi-monthly payroll schedule is that it brings down the number of payroll runs, which can ease the administrative pressure for HR and accounting teams. Since paychecks are issued only twice a month, businesses spend less time processing payroll compared to a bi-weekly system. Another benefit is that this schedule aligns well with monthly expenses like rent, utilities, and other recurring bills. This can be a significant perk for employees in order to easily manage cash flow.
Still, bi-monthly payroll does have some drawbacks, particularly when it comes to payment consistency. Actually, for a company, those benefits we mentioned could even be considered drawbacks, depending on the accountant. There's also what the employees think. Since the pay dates are fixed on the calendar rather than tied to specific weekdays, employees may face varying gaps between paychecks. This can make budgeting tricky, especially for those who depend on a predictable payday.
Pros and Cons of Bi-Weekly Payroll
With bi-weekly payroll, one of the biggest benefits is the predictability it offers to the employees. Employees know they’ll receive a paycheck on the same weekday every two weeks. This consistency is especially helpful for workers who live paycheck to paycheck or prefer a stable cash flow. This is also arguably true for the bi-monthly method. It just boils down to a worker's preference.
On the flip side, bi-weekly payroll requires more payroll runs that increase administrative work and costs for businesses. Processing payroll every two weeks means more frequent calculations, tax withholdings, and direct deposit transactions, which can add up over time. Another challenge is that when it comes to biweekly payroll decisions, the occasional “extra” paycheck comes up twice a year.
Factors to Consider When Choosing a Payroll Schedule
When you find yourself in the place of deciding between bi-monthly and bi-weekly payroll, several key factors come into play, like industry standards and financial stability. Let’s take a look at them:
Business Size and Industry Norms
One of the first things to consider is the size of your business and what’s typical in your industry. Larger companies with well-established payroll systems may have the resources to handle bi-weekly payroll runs, while smaller businesses might prefer the simplicity of bi-monthly payroll to reduce administrative workload. Additionally, certain industries have clear norms—retail and hospitality, for example, often favor bi-weekly schedules to accommodate hourly employees, while corporate and finance sectors frequently stick to bi-monthly pay cycles. The easiest way to check what the industry is doing is to head to the public CES survey.
Employee Preferences
Employee preferences also play a big role. Many workers appreciate the consistency of biweekly paychecks since it maintains a steady cash flow and makes budgeting easier. On the other hand, salaried employees who are accustomed to a fixed monthly budget may not mind bi-monthly paychecks, especially if their expenses align with that schedule.
Administrative Resources and Payroll System Capabilities
Another important factor is the administrative capacity of your payroll system. Keep in mind that processing payroll every two weeks means more frequent calculations, tax withholdings, and direct deposits. If your company has a dedicated payroll team or uses automated payroll software, handling a biweekly pay schedule might not be an issue. But, if resources are limited, sticking to a bi-monthly schedule could save time and make payroll management much easier. It really depends, since some accountants or payroll managers will claim that either side is better, and they'll be able to pull up good cases for it.
Budget and Cash Flow Considerations
Finally, budget and cash flow shouldn’t be overlooked. With bi-weekly payroll, businesses need to account for two additional pay periods each year. Companies that rely on steady revenue streams may not notice the difference, but for those with tighter cash flow, these extra payroll runs can add a new level of financial pressure. Bi-monthly payroll, with its fixed dates, can help businesses align payroll expenses with other recurring costs.
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Why HR Software Can Help Manage Payroll
Choosing between bi-monthly and bi-weekly payroll depends on your specific business needs and employee preferences. Bi-monthly payroll is easier on administrative tasks with fewer pay periods, which is a good fit if your business deals with salaried employees and wants to align payroll with monthly expenses.
On the other hand, bi-weekly payroll offers more predictability and consistency, particularly for employees who depend on regular paychecks. While it may require more administrative work and complicate budgeting slightly with the extra pay periods, it’s a great option for businesses with hourly employees or industries that need to account for fluctuating work hours.
At some point, your decision should be guided by your company’s size, payroll capabilities, industry norms, and the financial preferences of your team.
The easiest way to implement either or both payroll schedules is with HR software. Plenty of payroll solutions are available for big or small companies, and modern solutions can even handle workers from overseas.
And if you want an easy way to assign a payroll method to a special department or employee, you should try TalentHR. You can organize employee profiles with its employee management dashboard. It has a well-documented API with which you can integrate it into payroll solutions, so that you can assign a payroll method to each department. And the same solution comes with benefits management (and an onboarding and ATS suite, and much more, really).
Register today for free to see how TalentHR can support your business!