What is a Semi-Monthly Pay Period?

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Semi-monthly pay is a popular payroll schedule used by many businesses in Canada. However, not many employees or employers understand how this pay schedule works.

As a business entity or organization, you are required to set up a payroll system. This system provides a structure your financial institution will follow when sorting out employees’ payments.

First, you must determine how often you want employees to get paid. To set this up, you can alternate pay periods for a different classification of employees.

This classification can be between salaried and hourly paid employees or however you deem fit. Whatever the case may be, ensure you pay all of the same types of employees the same way. That is, all salaried employees should be paid the same way and vice versa.

Paychecks differ in terms of how frequently they are paid. They can be paid weekly, biweekly, semi-monthly, monthly, or based on contracts. This article will be exploring the semi-monthly pay period, how it works, and its benefits.

What is a Pay Period?

A pay period is a recurring duration over which employee work time is recorded and paid. That is, it is the agreed period when employees must pay their employees. This payment schedule can be weekly, bi-weekly, semi-weekly, or monthly.

Most hourly employees are often paid weekly. That is they get a total of 52 paychecks in a year. Sometimes, employees are paid a week in arrears.

This means that they record and bring in their timesheets at the end of one week. Then, they will be paid for that time a week later. This payment schedule gives the payroll clerk ample time to calculate pay for these employees.

Semi-Monthly Pay Period

A semi-monthly pay period refers to a payment schedule whereby employees receive their paychecks twice every month. This means that they receive 24 paychecks in a year. Alongside the biweekly plan, semi-monthly pay is one of the most common pay schedules used by businesses.

Generally, a semi-monthly pay schedule commences at the beginning of a month and ends by the middle of the month. Alternatively, it can start from the middle of the month and end by the end of the month. It can also start at the beginning of the next month, depending on the length of the month.

For example, if a semi-monthly pay period begins on the 1t6h of April 2021, it will end on the 1st of May, 2021. Another pay period will start on the 2nd of May, 2021, and end on the 16th of May, 2021. That is how it will continue till the end of the year.

The paycheck size (the amount) varies for hourly employees (employees paid based on the number of hours they work per week) due to the irregular length of months. The paycheck will be more extensive in months with longer days and smaller in months with lesser days.

For permanent, salaried employees, their total annual salaries will be divided between 24 paychecks and are not affected in any way. The paycheck remains the same regardless of their pay schedule. This also applies to full-time non-salaried employees, except that the paychecks they receive will be adjusted according to overtime hours or days off.

Also, monthly deductions like taxes and worker’s benefits are made before the paychecks are released. The deductions are divided between the two paychecks received in a month.

Benefits of a Semi-Monthly Pay Period

  • As an employee, you will always receive your paycheck on the same date. This will help you in planning precise budgets for your expenses as well as scheduling your bill payments.
  • For businesses, it is a cost-effective method as it reduces the cost of engaging a payroll service. There are lesser paychecks compared to biweekly or weekly pay periods.
  • For employees who manage payroll, it reduces the amount of time they use in doing so.
  • Employees can easily calculate their monthly deductions and the exact amount they will take home because the deductions will be divided between two paychecks and will always be the same.
  • It also reduces the need for month-end adjusting entries.

As common as the semi-monthly pay schedule is, some industries prefer the other forms of payment schedules. For instance;

  • The manufacturing and construction industry prefer the weekly pay schedules because their employees work irregular hours. It helps to track and manage irregularities.
  • Restaurants also use the weekly pay schedule for their hourly staff.
  • High-paying sectors and financial service companies, on the other hand, prefer the monthly payment schedule. This may be due to the substantial amount their employees receive.

Businesses with hourly employees who work for a regular number of hours per week, for example, 40 hours per week, prefer a semi-monthly pay schedule.

Conclusion

As described above, a semi-monthly pay period has its benefits for both the business/employer and the employees. This makes it one of the preferred forms of pay schedules by many businesses in Canada.

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.