- Nov 29, 2023
How To Calculate Semi-Monthly Pay: A Definitive Guide
Your payroll schedule affects both the personal budget of your employees and your business’s accounting. Your payroll schedule affects both the personal budget of your employees and your business’s accounting. One of the better solutions that companies look towards is generally on the 15th as well as the last day of the month. You can create paystub for free by using the online free tool called Stubbuilder.
Instead of bi-weekly payrolls, which include 26 payments in a year, semi-monthly payment schedules consist of only 24 payments in a year.
This creates a heavy impact on the size of your employee’s paycheck. Moreover, it can also take into account deductions for benefits, external billing of employee time, and overtime calculations.
In this guide, let’s give you a full breakdown of semi-monthly payroll and everything you need to know about its process. Let’s begin!
What is Semi-Monthly Pay?
Semi-Monthly Pay is a schedule for regular payments. Specifically, this will consist of payments- twice a month- as opposed to one- on particular days.
This generally takes place on the first or the last day of the month and the 15th. This means that you are paid twice a month for the services you have performed.
Since a year consists of 12 months, this means that you will be provided with 24 semi-monthly paycheck as a result.
The Overtime Factors:
Under federal laws, hourly employees have to be paid a premium for undertaking overtime hours- based upon the other ones on their contract.
According to the Fair Labor Standards Act, workweek overtime is defined as not replicating the semi-monthly pay schedule.
So, hourly employees prefer to undertake bi-weekly pay periods other than semi-monthly.
Calculating Semi-Monthly Pay Using Annual Salary:
When calculating the gross amount of your employees’ salaried semi-monthly paychecks, divide their annual salaries by 24.
For example, an employee who earns an annual salary of $48,000 will have a semi-monthly paycheck of $2,000.
This can be calculated as 48,000/24 = $2,0000.
Calculating Semi-Monthly Pay Using Bi-Weekly Salary:
If your business is used to having a bi-weekly schedule and you are looking to transition it into a semi-monthly schedule, the gross paycheck of your employee will be more even if their annual pay remains the same.
While establishing a new semi-monthly pay for those salaried employees who used to be on a bi-weekly payroll, you can divide the annual salary by 24 or do this instead:
Multiply the gross pay of your employee’s bi-weekly paycheck by 26, and this will provide you with the annual salary.
Divide this by 24- this will provide you with the gross pay for your employee’s semi-monthly pay period.
Calculating The Daily Rate For Your Employee’s Semi-Monthly Pay:
Sometimes your employees won’t start work on the first or last day of the month. Your business may only rely on employees during specific projects for internal accounts or for external clients.
All you have to do is divide your employees’ gross semi-monthly salary to confirm the full paycheck using the number of calendar days in that specific month.
For example, a gross pay of $2,000 will reveal a daily rate of $133.33 within a period of 15 days. So, for 16 days, this number will be $125.
During Feb, the pay period is 13 or 14 days- the outcome will be $153.85 or $142.86 daily rates.
Make Sure That You’re Re-Calculating Any Benefit Deductions
There are some voluntary employee deductions- for example, health care coverage- that are generally calculated on a monthly basis. Businesses transitioning from a bi-weekly to a semi-monthly payroll schedule will have to re-assess and implement when those general deductions are in place.
Processing Semi-Monthly Payroll For Employees on Hourly Rates:
Right from pay period to pay period, hourly employees will often have very varied schedules. So, employers will delay these paychecks to ensure there is enough time to process the sheet.
In addition to this, large businesses might have internal deadlines for processing sheet submissions- this is generally between the end of the specific pay period and the first day.
Disadvantages of Semi-Monthly Payroll:
The payment schedule is a major drawback, and the frequency of preparation usually makes this process more costly.
Under monthly payments, businesses only need to prepare payrolls 12 times a year. They have to be prepared for more than 24 times. This will generally double the cost of the preparation depending upon the approach.
There are various benefits of transitioning from a weekly, bi-weekly, or monthly pay schedule into a semi-monthly paycheck. If you need to create paystub, Stubbuilder is your solution.