Wednesday, August 28

Bi-weekly payroll or bi-monthly payroll?

If you google "Bi-weekly  or bi-monthly payroll", you will find a lot of entries, mostly in accounting websites, discussing which one is better. 1 , 2, 3...

Before I start the discussion, we need to learn a little bit about English. "bi-weekly" has two meanings: twice a week, and once every two weeks. The same goes to "bi-monthly": it can be either twice a month, or once every two weeks. So "semi-monthly" would be the better word to describe being paid twice a month.
In one working environment I observed a conversation that one side said "bi-weekly" meaning twice a week, while the other side said "bi-weekly" meaning once every two weeks. So I have to stop them and clear up the confusion so that the conversation could continue. After that, the team has to use the terms "twice a week" and "once every two weeks" in communication.

So to be clear, in this discussion, the "bi-weekly" payroll means the employee gets paid every other Friday. the "bi-monthly" payroll means the employee gets paid on 15th and the last day of each month. If the pay date is not a work day, change it to the previous work day.

Those pages in accounting websites pretty much have the same conclusion:
1, Both of them have same effect on tax. Neither one of them can save more tax than the other one.
2, The "bi-weekly" method need the accountants to do more booking each year, than "bi-monthly" method.
3, It's easier to calculate "bi-weekly" payroll for hourly workers. It is easier to calculate "bi-monthly" payroll for salary workers.

There is one thing they don't talk about: What difference does it make for employees, by choosing "bi-weekly" or "bi-monthly".

As a regular salary work, I found the "bi-weekly" payroll is very annoying:
All of my bills come in monthly, including utility bills, credit card bills, cell phone bills, mortgage, car loan. I guess mortgage and car loan can be negotiable to be paid bi-weekly, but others can't. So with bi-weekly payroll it is very hard to find out how much you earn every month, and how much you pay at the same time.
After switching to a new company that is using bi-weekly payroll, my bookkeeping is a mess now.

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