How to Calculate Semi-Monthly Pay: Hourly and Daily Periods

When deciding the payroll schedule, it is important to know that it affects the company’s cash flow management and the employees’ job satisfaction.

One of the pay periods that companies use is semi-monthly. According to BLS Current Employment Statistics, 19.8% of businesses and establishments use semi-monthly salary schedules in 2023.

If you want to gain insights about semi-monthly salary, read on as we discuss how a semi-monthly payroll schedule works, its distinction from biweekly pay, pros and cons, best practices, and how to calculate semi-monthly pay: hourly and daily rates.

What is semi-monthly pay?

Semi-monthly pay is a salary period where employees are paid twice a month. Payments are made on specific days of the month, usually on the first and 15th or the 15th and the last day of the month.

This release of salary has a consistent schedule and structure with a slight variation due to weekends and holidays.

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How does semi-monthly pay work?

There are two pay periods for semi-monthly salary: fixed days and floating days.

1. Fixed days

   This means giving paychecks on the same dates every month. For example, employees receive their salary on March 1 and March 15. This offers predictability and assures employees of their budget.

2. Floating days

   Paychecks are given on dates that can change each month. For example, salary is given on the 15th and the last day of the month. This date is unpredictable since the last day of a month can vary between 28 to 31.

   Here is a rundown of the number of paychecks an employee gets on a monthly and yearly basis:

3. Monthly salary

   The salary of employees is divided into two paychecks per month. For example, the monthly salary is $5000, so the semi-monthly salary would be $2500 every payday.

4. Annual salary

   Employees will get a total of 24 paychecks every year.

   12 months x 2 payday per month = 24 paychecks

Differences between biweekly and semi-monthly

Biweekly and semi-monthly pay periods are typically used interchangeably. However, they differ in their frequency, paydays, consistency, and paycheck size.

	Biweekly	Semi-monthly
Frequency	Occurs every 2 weeks; employees receive 26 paychecks per year	Occurs twice a month; employees receive 24 paychecks each year
Paydays	On specific days like Fridays	Either on the 1st and 15th or the 15th and last day of the month
Consistency	No specific pay date each month	Consistent pay dates each month
Paycheck size	Smaller since payments have more pay periods	Larger since payments have fewer pay periods

Pros and cons of semi-monthly salary

If you are planning to adopt a semi-monthly salary as your company’s payment schedule, here are its advantages and disadvantages that you should consider first:

Advantages

• Consistent pay schedule

  A predictable pay date helps employees in budgeting their finances beforehand. HR professionals will also have a simpler payroll system as the schedule is more direct with the usual 2 paychecks per month.

• Compatible with the cycle

  The monthly business cycle is used by many companies for budget reviews and financial statements. Having a semi-monthly pay frequency is more aligned with this system as it allows a neat tracking between salary costs and company finances.

• Stability with leap years

  There is no need for adjustment in payroll management during leap years. This means smoother processes throughout the years since the pay stays consistent, avoiding any conflict that comes with recalculations.

Disadvantages

• Complications for hourly workers

  The calculation for hourly wages might be more complex, especially if the pay schedule is under two different work weeks.

• Adjustments on pay dates

  If the pay date falls during weekends or holidays, it needs to be adjusted. This may lead to disruption of financial plans and disappointment for employees.

• Length of waiting time

  When employees are accustomed to weekly or biweekly pay, longer pay intervals in a semi-monthly approach might be a problem, especially to workers who are barely making ends meet.

How to calculate semi-monthly pay: hourly

As mentioned above, there might be a complexity that comes with hourly employees when adopting semi-monthly salary.

Here is a step-by-step process on how to simplify the calculation of semi-monthly salary in hourly, using the formula:

Semi-monthly pay ÷ (hours per week × weeks in a year ÷ semi-monthly periods in a year)

1. Step 1: Determine semi-monthly salary

   This is the amount an employee earns on the 1st and 15th day of the month or the 15th and last day of the month.

   • Example: Semi-monthly salary is $4000.

2. Step 2: Calculate work hours in a semi-monthly period

   If an employee works 48 hours per week, multiply 48 hours by 52 weeks in a year. Then, divide it into 24 semi-monthly periods in a year.

   • 48 hours x 52 weeks in a year = 2496 hours per year

   • 2496 hours per year / 24 semi-monthly periods = 104 hours per semi-monthly period

3. Step 3: Calculate hourly salary rate

   Divide the semi-monthly salary by 104 hours. The hourly rate for a $4000 semi-monthly salary would be $38.46.

   • $4000 semi-monthly salary / 104 hours = $38.46 per hour

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How to calculate semi-monthly pay: daily

Here is how you can calculate the daily rate from a semi-monthly salary, using the formula:

Semi-monthly pay ÷ (workdays per week × weeks per year ÷ 12 months ÷ 2)

1. Determine semi-monthly salary: This is the amount an employee earns on the 1st and 15th day of the month or the 15th and last day of the month (e.g. $4000).

2. Calculate workdays in a semi-monthly period: If an employee works 6 days per week, multiply that by 52 weeks per year and divide it by 12 months. Divide the result by 2 to get 13 workdays in a semi-monthly period.

3. Calculate daily salary rate: Divide $4000 semi-monthly salary by 13 workdays to get a $308 rate per day.

Semi-monthly pay: best practices for HR

To successfully integrate semi-monthly salary in your company, you need to follow the best practices in managing this type of pay period. Here are some of them:

• Educate employees.

  A shift in the payroll process can lead to confusion and concerns from employees so it is important to assure them of the new pay system and address issues with clarity and transparency.

• Communicate changes beforehand.

  Since the semi-monthly salary period can be adjusted by weekends and holidays, inform the employees of the changes in pay schedule ahead of time so they can anticipate financial situations.

• Use software to streamline processes.

  Having an automated payroll system can save you time, human error, and a noncompetitive salary. If you want to work with efficiency and ease, get software that makes salary management a better experience.

One tool that can help you achieve a streamlined pay process is Compensation Software. It allows you to create, edit, and model salary structures fit for your company. It automatically communicates pay data among managers and gives insights on fair pay for your employees.