What is the benefit of semi-monthly payroll versus other payroll options?


Quick Answer

Semi-monthly payroll periods offer various benefits to the employer over bi-weekly and weekly payroll periods, including lower processing costs and more efficient integration with accounting practices and benefit deduction schedules, according to Entrepreneur. Monthly payroll periods offer even more of these benefits from an employer's perspective but employees who receive hourly wages consider them to be least beneficial.

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Full Answer

Although semi-monthly payroll periods sometimes seem not very different than bi-weekly payroll periods, the former constitutes only 24 pay periods as opposed to 26 pay periods on the bi-weekly schedule, explains Entrepreneur. The two fewer pay periods means savings in processing costs for the employer. More significantly, however, such pay periods correlate more exactly with monthly accounting periods, each month having an even number of pay periods. This avoids the need to incorporate monthly accruals to address the two extra pay periods.

Employee benefit deductions for such offerings as health care insurance also function on monthly schedules, continues Entrepreneur. Semi-monthly pay periods ease the precision of these deductions and make clear to employees exactly how much they are paying for each benefit. Employees compensated by wages based on hourly pay prefer the weekly or bi-weekly cycle because the structure of overtime pay is less complex to understand, they receive more frequent paychecks and they can more efficiently arrange schedules to their advantage.

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