Biweekly payroll definition
/What is a Biweekly Payroll?
Biweekly payroll refers to a payroll under which employees are paid once every two weeks, which generally means that there are 80 regular hours of work incorporated into each payroll. The concept is used by payroll managers who want to reduce the total amount of effort expended processing payrolls over the course of a year.
Since payments are made once every two weeks, this means that there are 26 biweekly payrolls per year. This translates into ten months per year that contain two payrolls, and two months per year in which there are three payrolls.
The amount paid to an hourly employee can vary from payroll to payroll, since the number of hours actually worked may vary. The amount paid to a salaried employee is unlikely to change from payroll to payroll, since the amount paid is simply a person's annual salary, divided by 26.
The date on which cash is actually paid to employees will be delayed several business days after the two-week period covered by the biweekly payroll, so that hours worked and other information can be compiled and converted into net pay information.
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Disadvantages of a Biweekly Payroll
There are a few disadvantages to using a biweekly payroll. One is that some additional wage accrual will probably be needed at month-end, since the pay period does not necessarily coincide with the accounting period. In addition, this approach requires the payroll staff to process two more payrolls than would be the case under a semi-monthly payroll system.
Biweekly Payroll vs. Semi-Monthly Payroll
A more efficient payroll system is semi-monthly, where there are always two payrolls in every month, or 24 payrolls per year. Under a semi-monthly system, the information recorded through the payroll system more closely aligns with the monthly reporting period, which makes it easier to close the books and issue financial statements. This differs from the biweekly payroll, where two extra payrolls must be processed per year, and a month-end compensation accrual will probably be required.