Biweekly Pay: Learn How to Calculate Biweekly Pay, Along with Its Advantages and Challenges

Does the pay cycle matter in any business or job?

Yes, pay periods equally impact your workplace and the company’s financial costs, no matter whether you are a business owner or an employee. Different industries have unique pay structures based on their financial obligations, like biweekly pay, weekly pay, and monthly pay.

That’s why, in this article, I’ve compiled detailed information on what is biweekly pay, how to calculate it, and how companies choose pay cycles to make profits.

So, without any further ado, jump straight in! 

What is Biweekly Pay?

Biweekly pay is a payment schedule where employees are paid every two weeks. Under this method, workers receive 26 paychecks per year, resulting in regular and predictable income. Sometimes, people might receive income three times a month, depending on the pay schedule. 

Companies that use this two-week payment system generally pay salaries on Fridays. If the payment day falls on a holiday, they pay them one day before in advance, i.e., Thursday.

With a regular income schedule, companies can efficiently manage their wages payable, daily allowances, and other costs. On the other hand, it simplified overtime calculations for administrators. 

How to Calculate Biweekly Pay?

After acquiring knowledge on “what is biweekly pay,” you are all set to understand how to calculate salary under this payment system. As an employer, it will help you to improve the cash flow management of your organization.

Let’s look at how to determine biweekly pay for salaried and hourly workers.

1. For Salaried Employees

To calculate two weeks’ income for salaried employees, you need to identify their annual income. Afterward, divide the total salary by 26 to get the actual biweekly amount, as there are 26 paychecks in a year.

Note: This calculation doesn’t include deductions like taxes or health insurance. So, you must be mindful of the company’s policies while determining the fortnightly salaries of employees.

Formula to calculate biweekly pay

Biweekly Pay = Annual Salary / 26

For example, if the annual salary of an employee is calculated to be $80,000. What is the biweekly pay?

Biweekly Pay = Annual Salary / 26

                           $80,000 / 26

                           $3076.92 (two-week income)

2. For Hourly Employees

Comparatively, dealing with workers who are paid hourly is a little more challenging than for salaried employees. Firstly, you must calculate their hourly rate and the working hours throughout the two weeks. Secondly, include overtime, if applicable, in their gross pay.

Formula to calculate biweekly pay

Biweekly Pay = Hourly Wage x Total Hours Worked (two weeks)

For example, if an employee worked 80 hours in two weeks and earned $25 per hour, what would be their fortnightly gross pay?

Biweekly Pay = Hourly wage * total working hours

                           $25 x 80

                          $2,000 (gross pay)

Also Read: Salary vs Hourly Payments: Which is Best Fit For You?

Advantages of Biweekly Pay

As I informed you earlier, workers are compensated every two weeks in a biweekly pay method. It maintains a balance between employee financial wellness and employer efficiency. This will streamline budgeting and business operations effortlessly.

Here, I’ve mentioned some essential points on how fortnightly pay is beneficial for both employees and employers.

1. For Employees

Let’s review how biweekly pay is beneficial for employees.

• More Frequent Paychecks

  You receive more frequent income than with a monthly or semi-monthly payment structure, which helps with budgeting and cash flow.

• Extra Paychecks

  Since there are 26 biweekly pay periods in a year, it means that employees will get two extra paychecks compared to semi-monthly pay to handle their expenses easily. Therefore, it can help them manage large expenses.

• Greater Financial Security

  More frequent paychecks reduce the need for short-term loans or credit card reliance for daily allowances.

2. For Employers

Now, dig deeper into the benefits of biweekly pay for employers or HR.

• Consistency in Payroll Process

  Payroll always falls on the same day (for example, every other Friday). Thus, it simplifies the payment process.

• Compliance with Work Periods

  When paid hourly, employees can easily calculate biweekly pay with the actual hours worked and overtime.

• Administrative Efficiency

Compared to weekly payroll, biweekly pay reduces administrative costs while analyzing fixed costs.

Biweekly Pay vs. Other Pay Periods: What’s the Difference?

The major key difference between biweekly and other pay periods is the total number of paychecks paid in a year. That’s why you must remember how many biweekly pay periods in a year — i.e., 26 annually.

Let’s compare how biweekly differs from various distinctive pay periods.

1. Biweekly vs. Weekly Pay

Weekly pay, also known as the average weekly pay, refers to the practice of compensating employees on a weekly basis. On the other side, biweekly pay provides payments every two weeks on the fixed day.

The breakdown of biweekly and weekly pay:

Basis	Biweekly Pay	Weekly Pay
Pay Periods Annually	26	52
Payday Frequency	Every two weeks (e.g., every other Friday)	Every week (e.g., each Friday)
Cash Flow	Regular paychecks, but less frequent.	Repeated paychecks every week.
Payroll Processing Costs	Less due to payments every two weeks.	More than biweekly weeks.

2. Biweekly vs. Semi-Monthly Pay

Semi-monthly pay means staff members are paid twice a month, resulting in 24 paychecks, lower than fortnightly pay (i.e., 26). Typically, biweekly pay is more consistent than semi-monthly pay in managing expenses.

The breakdown of biweekly and semi-monthly pay:

Basis	Biweekly Pay	Semi-Monthly Pay
Pay Periods Annually	26	24
Payday Frequency	Every two weeks (e.g., every other Friday)	Twice a month (e.g., 1st and 15th of every month)
Cash Flow	Steady payments.	Regular paychecks and less frequent than biweekly pay.
Payroll Processing Costs	Approximately the same as semi-monthly pay.	Approximately the same as a biweekly payment structure.

3. Biweekly vs. Monthly Pay

Monthly pay is the most commonly used payment structure by companies. In this method, employees get payments after one month on a fixed date, resulting in 12 pay periods. Comparatively, biweekly pay is paid every two weeks, leading to 26 pay periods per year.

The breakdown of biweekly and monthly pay:

Basis	Biweekly Pay	Monthly Pay
Pay Period Annually	26	12
Payday Frequency	Every two weeks (e.g., every other week)	Once a month (e.g., at the end of a month)
Cash Flow	More frequent and easier for budgeting.	Not steady, but challenging for budgeting.
Payroll Processing Costs	Higher than the monthly pay due to frequent payment processing.	Lower than biweekly pay due to fewer paychecks.

4. Biweekly Vs. On-Demand Pay

On-demand pay, also known as earned wages, is a system where workers demand their earned wages before the traditional payday. On the other hand, biweekly pay is fixed every two weeks on the same day.

The breakdown of biweekly and on-demand pay:

Basis	Biweekly Pay	On-Demand Pay
Pay Period Annually	26	Based on requests
Payday Frequency	Every two weeks (e.g., every other Friday)	Upon demand or request.
Cash Flow	Regular and predictable paychecks.	Immediate access to earned wages.
Payroll Processing Costs	Lower than on-demand pay.	It may be higher due to frequent requests.

Also Read: 40% Tax Bracket in the UK: Threshold Rates and How to Reduce It?

Potential Challenges with Biweekly Pay

With regular, frequent, and easy management, biweekly seems an ideal option for a payment structure. However, paying compensation every other Friday can be frustrating for organizations. After all, behind its consistent payouts, there are several known complications that can affect both employers and employees.

Here, I’ve jotted down some challenges that workers and employers face.

1. For Employees

Let’s take a look at how biweekly pay negatively affects employees.

• Budgeting Issues 

  While fortnightly pay makes budgeting easier than monthly pay, many people find it more difficult to manage than weekly pay. Besides this, low-wage workers faced challenges with small and uneven amounts.

• Increased Complexity 

  Due to the occasional three pay periods in a month rather than two, it can be more complex to accurately determine take-home pay and deductions. It can lead people to scratch their heads because of such complexities.

• Financial Strain

  If an unexpected expense arises, it can create a financial strain for those living on small paychecks. So, smaller and more frequent payments also negatively impact financial savings.

2. For Employers

Let’s take a look at how biweekly pay can be challenging for employers.

• Increased Administrative Work

  Steady payments result in more administrative work for HR and payroll teams, like calculating, analyzing, recording, and frequently transferring every two weeks.

• High Payroll Costs

  More payroll runs can result in higher payroll costs, potentially impacting the company’s management of accounts. Hence, it can break the bank of an organization.

• Maintaining Bookkeeping

  Bookkeeping can be complicated because every year has two months with three paychecks. This can intrigue the accountant and other team members to keep track of accounting equations.

How Does a Company Choose Pay Cycles?

Companies should select their payment structure based on important factors like industry norms, legal requirements, and, most importantly, budget. These aspects help a business owner to make a decision in the best interest of both the company’s welfare and employees’ satisfaction.

Here are the following factors that affect an organization’s pay cycle.

1. Legal Compliance

Businesses must adhere to local and federal laws regarding pay frequency, as some jurisdictions have minimum payment requirements. By following legal requirements, organizations can avoid penalties and lawsuits against themselves.

2. Payroll Software

Some payroll software charges companies every time they run payrolls. This can be extravagant for businesses that deal with biweekly payslips. So, it’s a wise decision to choose pay cycles according to payroll software.

3. Industry

Different industries have different pay frequencies, like construction and hospitality have irregular working hours. Therefore, they use weekly pay due to uncertain hours. On the other hand, education and entertainment commonly use biweekly pay.

4. Employee Satisfaction

An organization could do employee surveys to figure out whether a biweekly, weekly, or semi-monthly pay cycle is best for its employees. If a company satisfies its workers, it will reduce the rate of employee turnover.

5. Financial Budget

By analyzing corporate accounting, a firm should carefully budget its expenses to make profits. This also includes the payroll process. Biweekly pay could be more consistent than monthly pay for planning and budgeting. This also helps a company to fix the payment day for its workers.

Also Read: Debits and Credits Cheat Sheet: Understand Accounting Essential Concepts in a Few Minutes

Wrapping Up!

After going through this article, you can understand how biweekly pay affects a company’s financial budget and employees’ lifestyles. Along with this, you can also learn how to calculate biweekly pay.

It’s just a common pay cycle that pays every two weeks, resulting in 26 pay periods in a year. This method can help workers plan their budgeting with predictable and frequent income.

So, if you are a business owner, research thoroughly the advantages and disadvantages of biweekly pay before implementing it in your company.    

Frequently Asked Questions

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