How Do Biweekly Pay Periods Work

Some Options For A 27

How do biweekly pay periods work?

Option 1: Divide the total salary among the 27 pay periods for that year, rather than 26. It will result in smaller amounts in each paycheck. In Jerry’s case, his bi-weekly pay for that year would be $1037.04 . You would have to do this starting at the beginning of the 27-pay-period year.

Option 2: Do nothing. Pay the same amount each payday. Because of the extra payday, you will effectively be giving employees a slight increase. This is the easiest option, but the most costly for you.

If you take Option 2, inform employees so that you can take credit for the increase. Also, be sure to inform the employees that their pay the following year will be reduced because they will be back to being paid over 26 pay periods.

According to HR consulting firm ERC, most employers , use the pay-as-usual option.

Option 3: Use the actual multiplier in every year. For bi-weekly pay periods, it would be 26.0893. In John’s case, this would result in payments of $1,073.23 each pay period, for a total of $27,904.16 in a 26-pay period year and $28,977.21 in a 27-pay-period year, an increase of $977.21 for the year.

The benefit of using the actual multiplier every year is that you wouldn’t have to re-calculate every year. You would still have to make an additional payment to employees in a 26-pay-period year to bring them up to their stated salary. You would also have an increase in a 27-pay-period year, but not as much as if you used option 2.

Different Types Of Pay Period

For any payroll department, a monthly pay schedule is ideal. They run payroll monthly, making it the fastest and most cost-efficient method. The monthly pay period is the least popular among employees as it can cause a financial strain. Although its not difficult to keep track of how many times employees will be paid in a year, they do generally prefer a higher frequency of paychecks.

Most employees do not like to wait an entire month to get paid. For most workers, especially low-paid hourly employees, this delay can mean serious cash flow issues.

Some states require a shorter pay period. If your business has employees in multiple states, it can be more trouble than it is worth to pay some employees monthly and alter the others depending on their state laws.

Monthly reports are created by accountants, therefore you may find that semi-monthly is easier. It should be noted that the last pay period of every month will typically end on the last day of the month. Many employers find that deductions are easier on this system.

Semi-monthly schedules help workers plan in advance. Companies with mainly hourly employees may find that overtime makes calculations tougher to decipher when based on previous pay periods.

What Is The Overtime Cap

The overtime cap is a limitation on the payment for overtime and applies to employees covered by the Citywide Agreement.

If the sum of your annual salary rate and any one-time, shift differential, or other premium pay you received in a calendar year exceeds the cap amount contained in the Citywide Agreement, you can no longer be paid for overtime worked. Instead, you will receive compensatory time at the rate of one hour for each hour worked.

However, the overtime cap will not apply if the Fair Labor Standards Act mandates payment for overtime worked or if your agency has been granted an overtime waiver by the Office of Labor Relations.

The most recent overtime caps are as follows:

  • Effective Oct. 26, 2019 – $87,860
  • Effective Sep. 26, 2018 – $85,301
  • Effective Sep. 26, 2017 – $83,424
  • Effective Sep. 03, 2016 – $81,788
  • Effective Sep. 03, 2015 – $79,406
  • Effective Sep. 03, 2014 – $77,469
  • Effective Sep. 03, 2013 – $76,324
  • Effective Sep. 03, 2012 – $75,568
  • Effective Sep. 03, 2011 – $74,820

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How Does Payroll Work When You Get Paid Twice A Month

As an employee, the frequency of payroll directly impacts your budget and living conditions. Every company has a unique payroll structure. As a result, its essential to know your organizations payroll cycle and how it works.

Most employers choose to pay their employees on a weekly, biweekly, semi-monthly, or monthly basis. Employees in the semi-monthly category receive their payment twice a month, usually on the 15th and on the last day of each month.

Unlike the bi-weekly payroll schedule, which has 26 payments in a year, a semi-monthly payroll schedule has just 24 pay periods. As you would expect, this affects the size of the employees paycheck.

It can also lead to other factors such as calculating overtime, benefit deductions, and the likes.

What Type Of Pay Period Should I Use

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The type of pay period to use really depends on what works best for you. If you have been in business for a while, you probably have an idea of what payroll schedule you prefer. However, if you’re new to the business world, or in a new industry, you should seek the advice of your CPA or accountant on what payroll schedule will work best for your employees.

It’s important to understand what a pay period is and what pay period schedules you can use to keep your business organized and keep employees paid on time.

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Your employees want a bigger piece of the pie. You want to attract and retain top talent while motivating employees to perform at their best. In this webinar, PayScale and BambooHR experts guide you to create a compensation plan that’s a win/win for both you and your employees.

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Final Thoughts: Pay Period Faqs

Pay period schedules may be one of the most confusing parts of payroll processing and your overall payroll system.

Who decides that employees should be paid every two weeks? Why do employees get paid more often one month than another? Why are there extra pay periods from time to time?

With Hourly’s payroll services, you can stop worrying about pay periods and focus on the things that move the needle forward in your business. Get started with a 14-day free trial.

Pay Period Leap Years

In some years, the calendar calls for an extra pay period for certain employees. This is a pay period leap year, and it affects salaried employees on a bi-weekly pay period. If the calendar lines up properly, the year will include a 27th pay period. Employers who are looking out far in advance can adjust employees paychecks so that their salary is divided equally into 27 payments rather than 26. If you dont plan ahead for a leap year, you have a few different options to deal with the extra pay period. Learn more in this article on pay period leap years.

As mentioned above, pay for salaried employees is typically distributed by dividing an annual salary into the appropriate number of payments for the year. Thus, on a monthly pay period, you would divide an employees annual salary by 12 to determine how much they should be paid in each period. How you time your pay periods does not matter so long as you ensure employees receive their full salary for the year.

2021 Pay Period Calendar NFC USDA

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Can You Get Paid Early With Biweekly Payroll

Some banks and financial institutions do offer early direct deposit payments, a feature that can give you access to your paycheck up to two days early. You may want to contact your financial institution to find out if early direct deposit is available to you. In the case that it isn’t, you can consider other financial institutions that do. This helps if it’s more convenient for you to have a payday that’s a few days earlier than the standard payday. Since you’re getting paid earlier, you still end up waiting two weeks between each paycheck.

It may also take a few pay periods after you sign up for early direct deposit for you to see your biweekly paycheck appearing in your checking account early. While researching how to get your biweekly payroll early, consider any fees or other terms associated with the service.

How Many Pay Periods Are In 2021

Biweekly Pay Basics Tutorial

The number of pay periods always stays the same with monthly and bi-monthly. But the number of times payroll is processed with a weekly or bi-weekly pay period structure can change depending on the year including if it begins on a Friday or includes an extra day .

There are 53 Fridays in 2021 meaning that if the organization adopted a weekly or bi-weekly pay period and paid employees on Jan. 1, there is a possibility that employees receive an extra paycheck. If thats the case, on a bi-weekly pay schedule, the three paycheck months are January, July and December. For organizations that processed their first payroll of the year the following Friday, April and October will be the three paycheck months.

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Between Biweekly Vs Semimonthly Pay: Whats The Difference

There are 26 biweekly pay periods in a year, whereas there are 24 semimonthly pay periods in a year. A biweekly pay cycle means that your employees are paid every two weeks, always on the same day. Biweekly payroll offers consistent pay days every month, with the added bonus of two extra pay periods.

Semimonthly payroll is great for businesses that mostly have salaried employees, with pay dates usually the 15th and the last day of the month, although some businesses opt for the 1st and the 15th of each month.

While youll be processing less payroll, which is always nice, your employees may not appreciate the disparity in pay days from month to month, not to mention the effect that holidays and weekends can have on pay days.

Hourly Vs Salaried Employees

One of the biggest things to consider when making the decision whether to pay employees biweekly versus semimonthly is the number of hourly employees you currently need to pay.

Its much easier to pay hourly employees biweekly, which runs on a 40 hour work week than it is to pay them semimonthly, particularly if your employees frequently work overtime.

If the majority of your employees are paid hourly, it might be best to opt for biweekly. If theyre salaried, semimonthly may be the way to go.

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How Are Pay Periods Determined

Adrian Mangel / The Balance

When you set up a payroll system for your business, one of your first tasks is to determine how often employees will get paid. You may utilize different classifications of employees , and each has a unique set of rules. First and foremost, be sure to pay all employees of the same type in the same way.

A good understanding of pay periods is essential to make sure employees are properly paid, and to keep your business operating smoothly. Here we cover the basics of pay periods, how different types operate, and how to deal with potential payroll hurdles.

Can I Change My Pay Schedule

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Once you choose a pay schedule, you may change it, but not frequently and not in a way that reduces your employees’ pay. For example, adjusting a pay period to avoid paying overtime to someone would violate the FLSA.

Changing your company’s pay schedule after several years for a legitimate business reason would be permissible, though.

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Making The Right Decision

Choosing the right pay period is critical to your organizations success. As you consider your options, get professional advice from an accountant or CPA to help you make a wise choice.

Whichever option you choose, well-designed time-tracking and payroll software can help ensure accuracy and compliance while saving time and effort. Even the hypothetical boss we mentioned who only does things when he gets around to it could see the wisdom in that.

Common Pay Period Mistakes To Avoid

Mistakes with payroll can result in fines and deeply unsatisfied workers. In fiscal year 2019, the U.S. Department of Labor recovered $322 million in back wages owed to workers. And an average $1,120 was due per employee in back wages in FY 2020. Some common payroll mistakes include the following.

  • Failure to calculate and pay overtime correctly. The majority of collection from the Department of Labor is because employers didnt pay time overtime. Unpaid overtime amounted to $186 million in recovered wages in FY 2019.
  • Failure to deposit employment taxes in accurate amounts and on time. One of the biggest payroll challenges is accurate withholding calculations for regular and supplemental pay. At the beginning of the calendar year, a business must decide which deposit schedule for social security and Medicare taxes to use either monthly or semi-weekly based on the total tax liability reported on Form 941 . Penalties are levied for late payments and increase according to the time frame they remain unpaid.
  • Failure to keep accurate records. The FLSA requires employers to keep three years of pay records, and some states may require even longer. Accurate records also help ensure employees are properly classified as exempt, non-exempt or independent contractors so your business can maintain compliance with labor and tax laws.
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    Your Decision Has Other Effects

    Payroll TaxesThe amount of pay will affect the total Social Security and Medicare you and your employees pay. Some employees may reach the maximum Social Security contribution earlier and may reach the threshold for the additional Medicare tax if you make an additional payment.

    Employee BenefitsPaying additional salary may also result in paying additional benefits. For example, you might be over-funding someone’s 401 with the extra pay period, beyond the maximum allowable amount. If that happens, you would have to give back the money to the employee.

    Tax Year for W-2sHaving a pay period extend over the end of a year brings up the issue of which year’s taxes the payment is in. The general rule is that the tax should be on the W-2 for the year when the paycheck is issued, and the employee has use of it.

    How To Choose Between Biweekly And Semimonthly Pay For Your Business

    Payroll Periods and Time Frames

    Both biweekly and semimonthly payroll cycles have numerous advantages and disadvantages. When making a decision about which payroll cycle is best for your business, you need to take several things into consideration when making your decision, including if you pay a lot of hourly employees, or if your employees are mostly salaried.

    Youll also want to decide if you want to have more or less payroll cycles, which can affect the amount you pay for payroll services, if your payroll service charges you based on the number of payroll cycles you process throughout the year.

    Below are a few pros and cons for both biweekly and semimonthly payroll.

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