Running a semi-monthly pay for non-exempt employees can be challenging. It is significantly different from the more common bi-weekly payroll system. Semi-monthly payroll gets complicated because employers are required to track the actual number of hours worked each workweek (seven days) and pay overtime if more than 40 hours are worked in that workweek. But before detailing how to structure semi-monthly pay for your company, it’s first important to clearly understand what semi-monthly pay means.
What Is Semi-Monthly Pay and How is it Different from Bi-Weekly?Semi-monthly pay is payroll distributed to employees 24 times per year. This is a different pay structure than the more common bi-weekly payroll, which is distributed 26 times per year. Semi-monthly pay is typically distributed to employees on the 15th and the last day of each month. Bi-weekly payroll, meanwhile, is paid every other week, usually on Friday.
How Do You Calculate Semi-Monthly Pay?
A common mistake with semi-monthly pay is to assume 86.67 hours each pay period (or some other identical amount every pay period), however employers are required to track (and pay for) all hours actually worked (including overtime) each workweek, not an “average”. Unfortunately, there are not exactly the same number of workweeks in each month nor are there exactly the same number of days and hours in each semi-monthly pay period.