Disadvantages of Semimonthly Payrolls

A semimonthly payroll has some advantages over weekly and biweekly payrolls. It requires an employer to process the payroll only 24 times per year while weekly and biweekly payrolls usually require processing 52 and 26 times per year, respectively. Still, some employers choose not to establish a semimonthly because of its disadvantages, particularly regarding hourly employees.

Varying Paydays

While a weekly or biweekly paid employee knows that they will be paid weekly or every two weeks on the same day, semimonthly paydays are not as easy to predict. Company rules vary, but many employers pay semimonthly employees on the 15th and last day of the month. Since some months have more days than others, semimonthly paydays fall on varying days, sometimes on a Saturday, Sunday or holiday. As an employer, you may pay the employee on the preceding business day. If an employee has direct deposit, the bank generally releases the funds into the employee’s account on the preceding business day. If you do not pay on the preceding business day and the employee does not have direct deposit, she must wait until the next business day to cash her paycheck.

Time Card Confusion

Understanding weekly and biweekly payrolls for hourly employees is easy even if they work overtime. This is because the employee is paid for a set time frame; the pay period start and end dates are for a specific amount of time, such as Sunday through Saturday for a weekly payroll. Due to the varying number of days in a month and depending on whether you adjust each semimonthly payroll so the employee gets paid on a business day, time card submission dates and pay period start and end dates tend to change. For example, one payday may include 12 days while the next has 13. Keeping up with the number of hours they will be paid each payday can get confusing for employees. Also, without a payroll calendar showing when time cards are due and the actual payday, the employee may not know what to expect on payday.

Payroll Processing Drawbacks

Payroll processing for semimonthly employees on a fixed salary each is straightforward. Those employees are paid the same amount each payday, except if they have a pay or deduction change. Payroll processing for semimonthly hourly employees can be complex since those employees may work different hours each pay period and the pay period start and end dates varies. It gets even more complicated when employees work overtime and must receive overtime wages for work hours exceeding 40 for the week and the pay period end date is not at the end of the week. Some employers pay semimonthly hourly employees current for 86.67 hours, the same as salaried employees, and make adjustments on the next paycheck. Making adjustments is risky, as the employee can suddenly quit without repaying the time owed. It is also time-consuming and can cause payroll errors.

Considerations

Due to the disadvantages of paying hourly employees semimonthly, some employers simply pay all of their employees weekly or biweekly; or they pay salaried employees semimonthly and hourly workers weekly or biweekly.

References

• Accounting Coach; What Is the Difference Between Biweekly and Semimonthly Payroll?; Harold Averkamp
• Lyford Consolidated Independent School District: 2010-2011 Semimonthly Payroll Calendar
• Pennsylvania Labor and Employment Blog; Another Headache for HR in 2009: Twenty-Seven Bi-Weekly Paydays; Michael Moore; November 2008