Bi-monthly vs bi-weekly: Which payroll schedule is right for your business?

Determining the best payroll schedule for your team isn’t just a matter of convenience — it’s a case of compliance, employee satisfaction, and efficient operations. And in the US, two of the most common pay schedules are bi-weekly and bi-monthly.

But what exactly is the difference — and which one is right for your business? In this article, we’ll break down the pros and cons of each approach, and help you decide which is the most suitable way forward for your team. So let’s dive straight in.

What do bi-monthly and bi-weekly pay schedules mean?

At first glance, these two pay schedules may look like the same thing. However, there are subtle differences between each approach.

What is bi-weekly pay?

As the name suggests, bi-weekly pay involves paying your employees every two weeks, resulting in 26 paychecks per year (or 27 in some years). In almost most cases, the payroll dates fall on the same day of the week (e.g., every other Friday).

What is bi-monthly pay?

Conversely, bi-monthly (or semi-monthly) pay involves paying your employees twice per month, typically on the 15th and last day of the month. This results in 24 paychecks annually.

This distinction might seem small, but it has significant implications for payroll processing, tax obligations, and cash flow management, which we will discuss below.

What are the pros and cons of a bi-weekly pay schedule?

Bi-weekly pay schedules are one of the most popular choices for businesses, especially in industries with hourly workers. However, like any system, this approach comes with distinct advantages and challenges.

Pros

A predictable paycheck for your employees. Bi-weekly pay schedules ensure employees receive their paychecks on the same day every other week, typically on Fridays. This predictability helps employees plan their personal budgets and align their expenses with their income.

Improved employee satisfaction. Frequent paychecks (26 times per year) mean employees don’t have to wait long to access their earnings. This shorter gap between pay periods can improve employee satisfaction, especially for hourly workers who depend on steady income streams.

Simplified overtime calculation. For hourly employees, bi-weekly pay periods align perfectly with the seven-day workweek typically used for calculating overtime. This makes compliance with federal and state labor laws simpler. It also helps avoid the complications of prorating overtime hours across uneven pay periods.

Alignment with workweeks. Since bi-weekly payroll follows a consistent two-week cycle, it neatly aligns with most employees' work schedules, and ensures that all hours worked — including overtime — are captured within a single pay period. This alignment reduces confusion for employees tracking their earnings and hours worked.

Cons

Complex payroll dates. While your employees benefit from consistent payment timing, your business must navigate months with three pay periods, which occur twice a year. These extra pay periods can strain your cash flow and complicate budgeting, especially if you are a small startup.

Increased administrative costs. Processing payroll 26 times per year means more frequent administrative work. For businesses with manual payroll systems or limited HR resources, this can lead to increased time and costs. Automating your payroll with a tool like Remote Payroll can mitigate this challenge.

A greater strain on cash flow. As mentioned, small businesses operating with tight margins may find it challenging to manage cash flow with bi-weekly schedules. Your payroll funds need to be available every two weeks, regardless of business performance during that period.

Inconvenience for salaried employees. While bi-weekly payroll works well for hourly workers, it may not be as convenient for salaried employees. Salaried staff often prefer semi-monthly pay schedules that align more closely with their monthly bills and financial obligations.

Tax withholding considerations. Payroll taxes are calculated differently for bi-weekly and semi-monthly schedules. Employers using a bi-weekly system may need to make adjustments to ensure tax withholdings align correctly with employee earnings over the course of the year.

What are the pros and cons of a bi-monthly (or semi-monthly) pay schedule?

Bi-monthly pay is a popular choice for businesses with salaried employees. This structure, involving 24 pay periods per year, aligns with calendar dates rather than workweeks, which presents unique advantages and challenges, as follows:

Pros

Simpler for salaried employees. Semi-monthly payroll is particularly well-suited for salaried employees who receive consistent wages. Since pay is not tied to hours worked or overtime, the predictable 15th and end-of-month pay dates align well with their compensation structure.

Less administrative work. With only 24 pay periods per year, businesses save some time and resources compared to a bi-weekly payroll schedule. This reduction in administrative burden can be especially beneficial for small businesses with lean HR or payroll teams.

Easier cash flow management. Fewer payroll runs mean your business can better manage its cash flow, as payments are evenly spaced across the year. Unlike bi-weekly schedules, there are no months with “extra” pay periods to account for.

Alignment with monthly financial obligations. For employees, semi-monthly payroll dates often align with the timing of recurring monthly bills, such as rent, utilities, and loan payments. This can help them manage their budgets effectively, as paydays fall on predictable calendar dates.

Simplified deductions and benefits administration. Many benefits, such as insurance premiums, are calculated monthly. Semi-monthly payroll simplifies the division of these costs into two even deductions, reducing complexity for both you and your employees.

Cons

Irregular payment periods. The length of semi-monthly pay periods isn’t fully consistent, as it depends on the number of days in a given month. For example, one pay period may cover 15 days, while another might cover 16 or more. This inconsistency can create complications for businesses calculating overtime for non-exempt or hourly employees.

Challenges for hourly employees. For businesses with a mix of hourly and salaried employees, semi-monthly payroll can pose challenges. Tracking hours and calculating overtime for hourly employees is more complex when pay periods don’t align with standard seven-day workweeks.

Potential employee confusion. Some employees may find it difficult to budget when pay dates are tied to the 15th and last day of the month. These dates don’t always fall on the same weekday, which can lead to confusion, particularly for workers accustomed to bi-weekly schedules.

Complicated overtime calculations. Unlike bi-weekly payroll, which aligns with weekly overtime laws, semi-monthly schedules may require prorating hours across pay periods. This adds an administrative burden and increases the likelihood of payroll errors if calculations aren’t carefully managed.

Impact on cash flow in shorter months. In months with fewer days, such as February, you may face compressed timelines for processing payroll. This can create logistical challenges, particularly when adjusting for holidays or weekends.

Compliance and state laws for payroll schedules

It’s important to weigh up the pros and cons for your business and your employees, but in some cases, state labor laws may dictate when your employees need to be paid — especially for hourly workers.

Each US state has its own regulations and requirements for how often employees should be paid, and this can differ based on industry and job categories. If you delay payments or make errors, you may create compliance risks.

This is why it’s advisable to use a payroll platform like Remote, which ensures you are always fully compliant with all state payroll and employment laws.

To see a full breakdown of pay frequency requirements in each state, check out our free US State Explorer tool.

Choosing the right payroll schedule for your business

Ultimately, to decide on the best payroll schedule, consider these three key factors:

1. Employee type. Salaried employees often prefer semi-monthly payroll, while hourly workers typically benefit from bi-weekly schedules due to consistent pay periods.

2. Cash flow. Bi-monthly payroll reduces the frequency of payments, which can ease cash flow management.

3. State regulations. Each state has its own requirements and laws on how often certain workers must be paid, and you must comply with these.

Simplify your payroll with Remote

If you’re still unsure, Remote Payroll removes the headache. Our centralized platform:

• Determines when your employees need to be paid based on state laws.

• Automates compliance, ensuring your employees are paid promptly and accurately.

• Saves time and reduces administrative headaches, letting you focus on growing your business.

To learn more about how Remote makes payroll quick, painless, and fully compliant, speak to one of our friendly experts today.

Trust G2’s multi-country payroll leader to keep you compliant

Hire and pay your global team with Remote and get access to our team of global taxation experts.

Get started nowSchedule a demo