What is Half Salary? Advantages and Disadvantages
Half monthly wages are pay cycles that you process twice a month. It is usually processed on the 1st and 16th or 15th and 30th a month. This results in 24 salaries per year (every other week, 26 salaries run annually). You can save money if your payroll payment service charges you for each payroll run.
If you are a small business looking for an easy way to set up a semi-monthly wage, consider using Gusto for your salary. Gusto is quick to install, allows you to manage your payroll cycle, and provides direct deposit and employee self-service so your employees can view online stubs directly. Gusto can automatically execute payroll for workers who have been exempted from payment. Sign up for a 30-day free trial today.
How to pay a semi-salary
Half-monthly wages are the common pay period used by a salaried worker. Payroll processing is processed twice a month (24 times a year), saving small businesses from weekly payroll processing costs. However, only about 20% of businesses use associate salaries, which are banned in some states. Some allow employees who are paid half-monthly wages to budget their bills so that they can be processed on the same day each month by giving them a standard date on which they are paid.
An example of a half-monthly pay schedule that is paid the day after the end of the payment period. If you are dealing with a half-paid allowance, you can copy this table and modify it to fit the time frame and payment date for a specific pay period. If your business payday ends with a working day, you need to change the actual payday.
New Hampshire and Connecticut require employers to pay their employees every week. Other states specifically tell you how long your employer can wait before processing your paycheck. For example, Iowa and Montana allow half-monthly wages, but require employers to pay wages within 12 and 10 days after the end of the wage period. California sets the maximum pay period for each job.
Therefore, we have provided a state-specific map below. It shows the maximum period for each week for the states that do not allow half-monthly wages and when each worker must be paid during the hours worked.
State payroll law
Federal law requires many employment requirements. However, how the overtime pay is calculated, the maximum length of the pay period (weekly, biweekly, half-monthly or monthly), and until the workers’ final checks are finished or fired. See our guide to payroll processing for more information.
Hover over a state to see the maximum allowable pay cycle length in the state: Weekly, Biweekly, Half-Monthly or Monthly.
Semi-Monthly Paid Schedule Appropriate
Half-monthly wages are only suitable for in-state employers where half-monthly wage cycles are allowed. Employers in states that mostly employ white collar workers become the most profitable employees by saving payroll processing fees and setting up a half-monthly pay cycle with employees who can manage their finances between salaries.
Half monthly wages benefit both employees and employers. On the employer side, because many payroll providers like ADP and Paychex charge based on wages, half-monthly pay can save money by requiring less payroll annually. On the employee side, you can rely on the exact date the worker will be paid monthly. This makes it easy to pay your bills, and you have the option of automatic payments in your checking account.
Here are those who benefit the most from a half-monthly wage.
- Companies that hire employees who are exempt from salary- these employers do not need to track overtime. They simply divide the employee’s annual salary by 24 payment terms.
- Businesses looking to reduce payroll processing costs-you can reduce payroll costs by paying 26 wages per year compared to 26 (monthly) or 52 (weekly).
- Enterprises whose employees want to make budgeting easier-when they get a regular salary, many employees can automatically calculate the budget and pay their bills automatically.
Half-month can be easy because your employer pays you twice a month in exchange for once every two weeks. Unless they’re start-ups and pay people monthly, it’s a welcome change for your employees. However, if an employee works every other year on a bi-weekly basis, the annual salary (26 vs. 26) is low, which can lead to cash flow problems for the paid worker. Employers should actually communicate why they are useful to them.
-Bob Cerone, CEO, CognosHR
The half-monthly wage cycle is mostly not suitable for employers who employ part-time or part-time workers. This will take a lot of time to calculate overtime pay because the working hours for each half year vary from month to month. That is, unless you are using software.
We recommend using scheduling and time management software that can track your working hours and pay cycles, such as working hours. I Work can manage overtime and share that data with payroll software. When I Work’s scheduling tool is free for small businesses with less than 75 employees.
The cost of the semiannual fee schedule
The payment cycle itself does not incur any costs as you can track the payment cycle using a spreadsheet or payroll software. In fact, most payroll providers can manage half-month pay along with other regular pay periods (daily, weekly, bi-monthly or monthly). However, you may need to invest time to run a half-monthly pay cycle.
- Payroll Software- Payroll software is free of charge for $15 per employee per month. Most interfaces with time and attendance software or time clock.
- Labor- If you have a part – time employee, you need to track the week by hour and upload or enter it into the payroll system to calculate overtime.
- Time & Attendance Software- Starts free and runs up to about $5 per employee per month. Many people have interfaces to payroll software like Gusto, like Homebase (free).
- Payroll Execution- Existing payroll software vendors such as ADP and Paychex charge an additional fee for each payroll run. Running your payroll twice a month can save you money.
- Tax- free payroll programs cannot manage tax payments, accruals, or timekeeping interfaces, so you have to pay your accountant from $100 to $1,200 per month.
If you want to run semi-annual payroll at the lowest cost, it’s best to find a payroll provider that can connect with the timekeeping system. So you can save time when paying for each pay period. Additionally, this payroll software often provides federal, state and local tax payments as well as new employment reporting.
I would recommend Gusto to small businesses looking for a payroll provider that costs half the ADP cost. Gusto handles half-monthly payroll processing, new employment paperwork, new employment filings and all tax returns. It also interfaces with the free scheduling and time tracking software Homebase. Both of these companies build a strong workforce management system for small businesses and start at $45 per month.
Banwol paid function
Half-monthly wages usually consist of a salary calculation taking into account all working hours worked over a period of 13-16 days. For example, a semiannual salary in February may include 15 days in the first pay period for the month and only 13 days in the last pay period for the month.
Half-monthly wages are more common in businesses that manage IT, financial or professional services workers and are less common in the construction, restaurant, retail and service industries.
There are several ways to pay half-monthly wages, depending on whether your worker is exempt or exempt and whether you are paying wages or wages during working hours. Here are 2 semi-collar payment options:
Example of monthly salary for a part-time non-avoidant employee
Hal works hourly for $14 per hour (he’s a non-exempt employee and he must be paid weekly overtime). He worked 87 hours between January and 15th. He is paid 16 days during the working hours. In addition to dealing with his wages for 11 working days in that period, the employer has to decide at any time during the two weeks that Hal has worked overtime (more than 40 hours per week). Because of your half-monthly wages, it’s very likely that your Hals standard work week will not match your pay cycle. Any time you work more than 40 hours each week will have to pay time and money.
This means that Hal’s weekly working hours and weekly overtime pay must be made before the payroll is executed for each pay period. Unless you maintain both a timing system and payroll software, you do these calculations weekly and payout periods for part-time employees can take a long time. Here’s how to calculate Hal’s half-monthly wage in this example: Suppose you worked three hours of overtime in one hour of the week.
$14/hour x 87 = $1,218
$14/hour x 1.5 xx overtime hours (weeks)
A paid period of from 1st to 15th of each month applies.
(Example: 3 hours overtime is this payment term = $63)
$ 1,218 + $ 63 (overtime pay) = $1,261 for this benefit period
Examples of quasi-payments for employees who are exempt from Salary
Sal is a salary man who paid $50,000 per month. Using half-monthly pay, the company calculates each pay period in the simplest way possible. They divide their salary by 24 (12 months x paid twice a month), so they get paid consistently across all pay periods.
$50,000/24 (half-year pay period) = $2,083 for each pay period
As these two examples show, half-monthly wages are a much easier way to pay for a workforce that is free of salaries. This is possible for part-time and non-exempt employees, but it is more complicated as you need to manage your weekly overtime pay and include that amount in your half-monthly wages.
Hourly workers are easier to manage weekly or biweekly pay. Because they follow the same weekly time zone as employee working hours and working hours. Next, let’s look at other pros and cons.
Half salary provider
As with other types of payroll processing cycles, half-monthly payroll can be managed in a number of ways by using free payroll software, outsourcing payroll, or working with a professional employer organization (PEO).
We will describe each half-salary payroll provider along with the vendor we recommend.
Free payroll software
Just 1-2 small businesses who get a half-day salary can get it with free payroll software. The free payroll software allows you to enter payroll hours and pay rates, and calculates the amount of pay that can be used as a pay stub when filling out two pay stubs per month. It’s free, but it often charges a fee for filing taxes and usually requires redundant data entry in working hours and payment charges.
Here are the best free payroll software vendors and the ones they offer.
HR / payroll software
HR/Payroll software does more than just pay employees. It tracks employee data such as name, address, position, and wage rates, and provides payroll processing to ensure employees are paid correctly and on time. Payroll software can interface directly with time clock, and can interface with time and scheduling software using API. Most offer direct deposit.
Gusto is recommended as the best payroll software for small businesses due to its low cost, easy-to-use software, and employee self-service options that allow employees to view pay stubs and download year-end tax forms. You can also use Gusto to run your payroll from your phone. These features can save you time.
Outsourcing Payroll Supplier
If you prefer to outsource your payroll payments, you have options ranging from payroll software to full service payroll providers. Here are some of the payroll outsourcing services we recommend.
Accountant or accountant
Some businesses prefer people or services that provide accounting and payroll services. It can be used as a one-stop shop for all your financial affairs, including dealing with semi-annual salaries. However, when you are looking for an accountant or accountant, make sure you know payroll laws in every state in which you do business. This will prevent salary and tax audits and reduce potential fines and litigation.
We provide reviews of all major payroll service providers for small businesses on our review page. If you have a supplier you are considering, please review other small businesses’ opinions about other suppliers before entering into a contract.
Vocational Employment Organization (PEO)
PEO is a co-employer. Outsourcing to PEO means handling non-employee salaries and managing all employee taxes, including employee deductions and tax agency payments. PEO is very useful when you want to give your employees the feel of working for a much larger company because their purchasing power allows them to offer benefits insurance options at a discounted price. PEOs range from under $100 per month to hundreds of people per employee, depending on the vendor and/or service options they offer.
If you are looking for a trusted PEO with decades of industry experience, try ADP Total Source. ADP is included in the PEO Buyer’s Guide based on payroll experts, custom options and software features.
Advantages and disadvantages of half a salary
Benefits of semi-monthly wages
Here are some of the benefits you can get from offering a half-monthly wage.
- Predictable Payroll Costs- Companies with exempted employees can predict payroll costs in advance by dividing the payroll of all employees by 24 pay cycles.
- Shorter pay cycles- Employers handle less pay cycles. That is, (24) rather than 26 (bimonthly) or 52 (weekly).
- Reduced Costs- Employers using payroll software like ADP or Paychex can save money by paying per payroll run, and processing less payroll.
- Paychecks arrive consistently-it’s like an employee gets paid for the same month on the 1st and 15th or 16th and 30th.
- The amount of salary paid remains unchanged-it’s like a paid employee gets the same salary every day. Support your budget and plan to pay your bills online.
Many factors that employers must consider when determining how often wages are paid include regulatory requirements, the number of employees, and other benefits that are affected by the frequency of wages being paid.+
Employers can start and end pay end dates for a schedule or fiscal year more clearly by ending their pay in a manner consistent with the calendar or fiscal year. Also, some monthly salaries provided by employers, such as medical benefits, can be more easily divided when the employer divides the month by 2 and does not have to allocate between the months. Calculating shared responsibilities by employers can be easier when salaries do not exceed a few months.
-Laurie Savage, Senior Compliance Analyst, Paychex
Disadvantages of half salary
However, there are some real drawbacks to providing semi-monthly wages, especially if you are hiring hourly workers:
- Labor Concentration for Hourly Workforce- Businesses with part-time, non-exempt workers working overtime can take a lot of time to calculate half-monthly wages and enter data.
- Make sure your paid cycle doesn’t fit your working week- it can be confusing for companies to explain pay stubs to workers whose wages and overtime don’t fit on their work schedule.
- Cut employee budgets- Hourly workers can have a hard time meeting maturity when paying only twice a month.
- State Regulations- Half-monthly wages are not allowed in states where you have to pay some or all of your employees every week. Check the requirements on the state website.
- You must pay early-if the monthly payment date falls on the weekend, the workplace is obliged to hire and pay employees on the previous business (work) day.
There are several benefits to a half-monthly salary. As an ongoing business process, dates typically fall into different time zones each month, allowing the person responsible for payroll processing and transfer to be scheduled. Every other week, in one scenario, individuals are tied to another Wednesday (e.g. with little flexibility).
More importantly, in fact you will always have exactly 24 payment terms per year. In the two-week scenario, the 27th wage is paid every few years, which creates confusion for those who receive annual wages. This is unavoidable in this bi-weekly scenario, but not every half month.
-Lori Kleiman, SPHR SHRM-SC, Managing Director, HR Subject
Alternative to half salary
The good news is that there are several options for paying half a month. The advantages and disadvantages of each are as follows. We hope that it will help you choose the payment method that works best for your employees. In fact, some companies offer different types of pay to different types of workers. For example, a half-monthly salary can be provided to managers and clerks, and a weekly salary can be paid to service workers and workers.+
The most common alternatives to paying employees are:
Weekly paid cycle
Weekly pay cycles are most common among part-time workers and retailers, restaurants and service industries. Those workers get 52 times every 52 weeks each year. In fact, some of the employees who don’t pay an hourly salary may be breachers of the contract, for some employees who pay paychecks. In states like New York and California, manual workers and other types of workers are required to pay weekly. Half-monthly wages are not selectable in states that require employees to be paid weekly, such as Connecticut, California, and New Hampshire.
Biweekly paid cycle
Bi-weekly payment means paying the employee every two weeks. That’s actually the most common payroll cycle, according to the US Bureau of Labor Statistics (BLS). It has an advantage over half-monthly wages, as the pay cycle is aligned with the working week, the calculation of overtime pay is simplified, and the question of how the employee pays and how to calculate overtime pay is reduced.
As companies grow, more companies move from other payment cycles to biweekly payment cycles. About 5% of businesses pay weekly, if required by the state pay law, and every several weeks.
Monthly pay cycle
Monthly wages are not the most common of all wage cycles. Not allowed in many states, and even states with options are often limited to higher-rewarded employees, such as executives. When you pay monthly wages, you collect the hours worked for the previous month and then pay the workers for those hours the following month.
However, just like your half-monthly wages, you also need to calculate the number of hours worked for overtime and then add it to your monthly salary. Also, employees do not like to spend more than 30 days between pay periods. If you are only hiring a white-collar worker, dividing the salary by 12 and paying the employee monthly is the easiest and least expensive option.
Frequently Asked Questions (FAQ)
Here are some common questions that employers and employees ask about half-monthly wages. If you have additional questions about half-monthly wages or other small business topics, you can ask them on the forum.
What is the difference between half-monthly and biweekly wages?
Here’s how I keep them straight. Remember that half means part or half. So, half-month means half-month. This is like getting paid once a month (or twice a month) at a time. If you are paid half-monthly, you have 24 pay days per year.
Bi means 2. So it means every two weeks every other week. After a few months you will have a 2 payment date, and after a few months it may be 3 times. If you run your payroll every other week, there are 26 payroll days in total.
Is it better every other week than half a month?
If all employees are paid, it is easier and less expensive to manage on a half-month basis. However, if overtime workers often work overtime, it could be better for two weeks every other week because the overtime calculation is lined up with the payroll time frame. Weekly biweekly is the most common payroll cycle with a 2 to 1 margin compared to half a month, and as the business grows, it tends to shift from half a month to another pay period.
As the employer grows, it moves to a two-week wage.
How long is the monthly wage payment period?
The number of hours worked in the half-monthly pay period depends on the hours worked. For example, if your lunch break is 1 hour from 8am to 5pm Monday through Friday, then the week is always 40 hours and 2 weeks (or once every other week) is always 80 hours. Unfortunately, it is not easy to calculate the half-month time since the monthly and number of hours are different for each payment period.
When calculating the reimbursable hours per half-monthly pay period, you need to determine the number of business hours per day, and then calculate the number of days per payment period, which ranges from 13 to 16 days (table at the top of this article).
For example, keep it simple and assume your business is open 8 hours a day, 7 days a week. In a standard 15-day payment cycle, it can be equal to a 120-hour payment period. However, if your business is open on weekends or the hours vary on different days of the week, then you need to count the number of working hours for all working hours within that paid period (or the software will do it). Determine how many reimbursable working hours you have in each of the 24 semi-monthly wage periods.
Gusto manages several payment cycles, calculates salaries, and can comply with labor laws that vary from state to state. We also charge per employee rather than pay cycle, so you can set up multiple pay cycles for part-time employees every hour as needed, monthly for exempt team members, and monthly sales fees-one affordable and easy-to-use system.