Biweekly Pay

What is Biweekly Pay?

Biweekly pay refers to a pay schedule where employees receive their wages or salary every two weeks. The payments typically occur on a set day of the week, often on a Friday, providing a consistent and regular income for the employees. Each paycheck reflects the hours worked, and any applicable overtime, during the two-week period.

This payment structure is commonplace across various industries and sectors. It's widely recognized for its predictability and consistency, which can make budgeting and financial planning easier for both the employee and the employer.

How Many Biweekly Pay Periods in a Year?

There are typically 26 biweekly pay periods in a year. This calculation is based on the 52 weeks that constitute a year. Since biweekly refers to a payment schedule happening every two weeks, when you divide 52 (weeks) by 2, you get 26 pay periods.

However, in some years, there might be 27 biweekly pay periods due to how the calendar dates fall. This situation is often referred to as a "payroll leap year". It's not an actual leap year; instead, it's a year with an extra pay period. Employers need to be aware of this possibility as it can have implications for payroll budgeting.

How to Calculate Biweekly Pay?

Calculating biweekly pay depends on whether the employee is salaried or hourly.

For a salaried employee, you would first determine their annual salary. Then, divide that annual salary 26 times (the standard number of biweekly pay periods in a year). The result is the amount the employee should receive each pay period. For example, if an employee's annual salary is $52,000, their biweekly pay would be $2,000 ($52,000 divided by 26).

For an hourly employee, you would multiply the employee's hourly wage by the number of hours worked in a two-week period. For instance, if an employee makes $20 per hour and worked 80 hours in the two weeks, their biweekly pay would be $1,600 ($20 multiplied by 80).

Remember that these calculations provide the gross pay, and deductions such as taxes and benefits will need to be subtracted to determine the net pay – the actual amount an employee takes home.

What Are the Benefits of Biweekly Pay?

For Employees:

• Regularity and Predictability: Paying your employees bi weekly can plan their expenses and manage their finances more effectively.
• Easier Budgeting: As the pay dates are consistent (typically every other Friday), employees can align their bill payments and other financial obligations accordingly.
• Additional Paycheck: In some years, employees might receive an extra paycheck due to how the calendar dates fall, which can be a financial bonus.

For Organizations:

• Simplified Payroll Process: Having a set schedule makes it easier for the payroll department to manage the payroll process.
• Cost Efficiency: Biweekly payroll is less frequent (as compared to weekly) which can lead to cost savings.
• Employee Satisfaction: Regular and predictable payments can lead to higher employee satisfaction, contributing to a positive work environment.

Are There Disadvantages to Biweekly Pay?

For Employees:

• Budgeting Challenge: Depending on an individual's budgeting skills, waiting two weeks between paychecks might be difficult, especially for people living paycheck to paycheck.
• Inconsistent Monthly Income: Some months will have three paychecks, while most will have two. This inconsistency can make monthly budgeting more challenging.

For Organizations:

• Payroll Leap Year: Occasionally, there will be a year with 27 pay periods, which can create budgeting challenges.
• Additional Administrative Work: More frequent payroll runs may mean more administrative work for the payroll department compared to monthly payrolls.

Does Biweekly Pay Affect Taxes?

A bi weekly pay schedule in itself does not directly affect the amount of taxes an employee owes. The amount of tax owed is determined by the employee's overall taxable income for the year, not the frequency at which they're paid. However, the amount of tax withheld from each paycheck can vary based on pay frequency.

Here's an example to illustrate this: let's say an employee makes $52,000 a year. If they're paid biweekly, that would be a gross income of $2,000 per paycheck ($52,000 divided by 26). The employer would then refer to the IRS withholding tables to determine how much federal income tax to withhold from a biweekly paycheck of $2,000, given the employee's filing status and allowances.

Biweekly Pay vs. Semi-Monthly Pay

Biweekly and semi-monthly are two common payroll schedules that employers use to pay their employees. While they might seem similar, they do have some key differences that can affect both employees and employers.

In a biweekly pay schedule, employees receive paychecks every two weeks, usually on a specific day, leading to a total of 26 paychecks in a year. This schedule occasionally results in a month with three paychecks due to the calendar structure.

On the other hand, a semi-monthly pay schedule has employees being paid twice a month on designated dates, leading to 24 paychecks per year, with pay periods varying between 13 to 16 days based on the monthly calendar.

What is more, to know about biweekly pay is:

• According to the United States Department of Labor (DOL), the following are the departments which they usually use biweekly systems in their payroll:
  • Department of Education and health services
  • Information services
  • Hospitality and leisure  
• If you choose a bi-monthly payroll system in place of a biweekly one, and in that case, if the payday falls on a holiday, it creates hardships for your HR to either pay in advance or delays the same, thereby calculations are disposed to possible inaccuracies or at least challenges
• According to research reported by the United States Bureau of Labor Statistics:
  • Approximately 43% of US employers pay their employees biweekly, and 33% of employers pay their workers on a weekly payroll system basis
  • The business concerned with having a smaller number of employees pay workers on a weekly basis but as and when it improves the number of employees (say around 1000 employees) then they pay 700 workers (70%) biweekly and the rest get weekly

Related: Wages, Basic Salary, Hourly Employee, Pay Stub, Straight Time Pay