In a biweekly payment schedule, the business determines when they pay the employees and do it once every two weeks. It is the preferred payment method for many US employers.
Why Do Employers Like Biweekly Pay?
Several aspects of the biweekly schedule make it more attractive to businesses than other payroll methods. With biweekly paydays, your HR will manage the payroll quicker and at a lesser cost due to several reasons.
Biweekly payments take less time and reduce the chances of error when compared to a weekly payroll. However, weekly payrolls require much more paperwork and run the risk of human error creeping in due to that fact alone.
It Saves Money
Most businesses use payroll processing companies, which comes with substantial charges for the employer. Many businesses prefer to save a little bit of the costs by paying biweekly instead of once a week. By the end of the year, the savings add up to a considerable amount, especially for mid-to-big scale businesses.
Why Do Employees Prefer Biweekly Pay?
It’s not just employers that prefer to pay once every two weeks. Many employees see benefits in biweekly pay. Some of the reasons workers like getting paid every two weeks include:
- The ability to more accurately budget their finances
- The increased financial security of a set payday in contrast to a payment date
- The three-times a month payment they receive twice a year
Knowing the exact day you receive your wages gives you the flexibility to budget more effectively. If you know you get paid every other Friday, you can set your bills up accordingly. Several studies show that such increased financial security increases efficiency in the workplace. This is a big plus for businesses.
The Hidden Bonus for Employees
The biweekly pay means an employee gets 26 paychecks each year. However, in leap years, there is a bonus 27th paycheck they get. This additional payment does not occur in a fixed payday arrangement.
Are There Tax Disadvantages?
The short answer is no. Biweekly payroll doesn’t involve an additional tax burden for the employer or the employee. Taxation is worked out on a yearly basis for both company and employee. The cycles in which the payments occur make no difference. Therefore, companies don’t have to consider any tax disadvantages when moving to a biweekly pay schedule. Always a plus!
Biweekly vs. Semi-Monthly Pay
Don’t confuse biweekly and semi-monthly payment schedules. There is a key difference. In biweekly pay, the employer chooses a certain day (for example, Friday) on which they pay their employees once every two weeks. The semi-monthly payments occur on fixed dates twice a month, for instance, on the 3rd and 18th.
The only real advantage to semi-monthly payments is for the employer. There are only 24 payments a year instead of 26. The disadvantages are overtime can get a bit more complicated to work out. For the employees, budgeting becomes a lot harder on a monthly basis.
Is Biweekly Pay Right for Your Business?
The first thing you need to consider is your state legislature. Each state decides the frequency with which companies have to pay their employees. The requirements may differ from state to state and industry to industry. Your safest bet would be to check with the Department of Labor (DOL) about any regulations that might affect your business.
According to the Department of Labor, nearly forty percent of US businesses have chosen biweekly pay. The top industries using that payment schedule are:
- Health services
- Leisure and hospitality
Chances are such a payroll scheme makes sense for you if your company operates in one of these fields.
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