Semi-monthly pay is a payroll frequency that processes twice a month — typically on the 1st and 16th or the 15th and 30th of the month. This results in 24 payrolls a year (versus bi-weekly, which runs 26 payrolls annually). That may save you money if your payroll service charges you for each payroll run.
If you’re a small business looking for an easy way to set up semi-monthly pay, consider using Gusto for payroll. Gusto is quick to set up, can manage any payroll cycle, and offers direct deposit and employee self-service so that employees can view their pay stubs online. Gusto can run payroll automatically for salaried-exempt workers. Sign up for a free 30-day trial today.
How Semi-Monthly Pay Works
Semi-monthly pay is a common pay period used for salaried workers. It processes payroll only twice a month — 24 times a year, which can save a small business from weekly payroll processing fees. However, only about 20% of businesses use semi-monthly pay, and it’s prohibited in some states. Some feel semi-monthly pay benefits employees by giving them standard dates that they receive their paycheck, allowing them to budget their bills so they can be processed on the same date each month.
Here is an example of a semi-monthly pay schedule paid the day after the end of the pay period. If you process semi-monthly pay, you may want to copy this table and modify it for your specific pay period time frames and pay dates. Keep in mind the actual pay date will need to change if your business pay date falls on a work holiday.
Sample Semi-Monthly Pay Schedules for 2019
|Pay Period||# of calendar days |
(work days vary)
|Example 1: 1st & 16th|
(employees are paid the day after pay period ends)
|Example 2: 15th & Month-end |
(employees are paid 15 days in arrears)
|Jan 1-Jan 15||15||Paid on Jan 16||Paid on Jan 30|
|Jan 16-Jan 31||16 days||Paid on Feb 1||Paid on Feb 15|
|Feb 1-15||15 days||Paid on Feb 16||Paid on Feb 28|
|Feb 16-28||13 days||Paid on Mar 1||Paid on March 15|
|Mar 1-15||15 days||Paid on Mar 16||Paid on March 31|
|Mar 16-31||16 days||Paid on Apr 1||Paid on April 15|
|April 1-15||15 days||Paid on Apr 16||Paid on April 30|
|April 16-30||15-days||Paid on May 1||Paid on May 15|
|May 1-15||15 days||Paid on May 16||Paid on May 31|
|May 16-31||16 days||Paid on June 1||Paid on June 15|
|June 1-15||15 days||Paid on June 16||Paid on June 30|
|June 16-30||15 days||Paid on July 1||Paid on July 15|
|July 1-15||15 days||Paid on July 16||Paid on July 31|
|July 16-31||16 days||Paid on Aug 1||Paid on Aug 15|
|Aug 1-15||15 days||Paid on Aug 16||Paid on Aug 31|
|Aug 16-31||16 days||Paid on Sept 1||Paid on Sept 15|
|Sept 1-15||15 days||Paid on Sept 16||Paid on Sept 30|
|Sept 16-30||15 days||Paid on Oct 1||Paid on Oct 15|
|Oct 1-15||15 days||Paid on Oct 16||Paid on Oct 31|
|Oct 16-31||16 days||Paid on Nov 1||Paid on Nov 15|
|Nov 1-15||15 days||Paid on Nov 16||Paid on Nov 30|
|Nov 16-30||15 days||Paid on Dec 1||Paid on Dec 15|
|Dec 1-15||15 days||Paid on Dec 16||Paid on Dec 31|
|Dec 16-31||16 days||Paid on Jan 1 (2020)||Paid on Jan 15 (2020)|
Not all states allow semi-monthly pay — for example, New Hampshire and Connecticut require employers to pay their employees every week. Other states are specific about how long an employer can wait before processing payroll. For example, Iowa and Montana allow semi-monthly pay but require employers to pay their employees within 12 and 10 days of the pay period end, respectively. California sets its maximum payroll time period by occupation.
Therefore, we’ve provided a state-by-state map below. It shows which states don’t allow semi-monthly pay and shows the maximum duration for each state in terms of when employees must be paid for time worked.
State-by-State Payroll Laws
Federal law dictates many employment requirements. However, the minimum wage amount varies by state, as do laws on how overtime is to be calculated, the maximum length of a pay period (weekly, bi-weekly, semi-monthly, or monthly), and when an employee’s final check is due when they quit or are fired. For more information, read our guide on payroll processing.
Hover over your state to see the maximum length of a pay cycle allowed in your state: weekly, bi-weekly, semi-monthly, or monthly.
Who a Semi-Monthly Pay Schedule Is Right For
Semi-monthly pay is only right for employers in states that allow a semi-monthly pay cycle. Employers in those states that have mostly salaried employees, want to save money on payroll processing fees, and have employees who can manage their finances between paychecks are the ones most likely to benefit by setting up a semi-monthly payroll cycle.
Semi-monthly pay has its benefits for both employees and employers. On the employer side, semi-monthly pay can save money by requiring fewer payroll runs each year, since many payroll providers, like ADP and Paychex, charge by payroll run. On the employee side, workers can rely on the exact date they’ll receive their paycheck each month. That makes bill paying easier and allows them to take advantage of automatic payment options within their checking account.
Here are the ones who benefit most from semi-monthly pay:
- Companies that hire salaried-exempt employees – These employers don’t need to track overtime; they simply divide the employee’s annual salary by 24 pay periods.
- Businesses that want to save on payroll processing costs – You’ll save payroll costs running payroll 24 times a year versus 26 (bi-monthly) or 52 (weekly).
- Firms that want to make it easy for their employees to budget – Having a regular payday makes it easier for many employees to budget and pay bills automatically.
Semi-monthly can be easier for the employer because they’re paying out two times per month as opposed to every two weeks. If they’re a startup and they’re moving from paying people on a monthly basis, this will be a welcome change for the employees; however, if employees are used to bi-weekly, it will be fewer paychecks per year (24 versus 26) and could create cash flow issues for those employees who live paycheck to paycheck. Employers really need to communicate why it’s useful for them.
– Bob Cerone, CEO, CognosHR
A semi-monthly pay cycle isn’t best for employers hiring mostly part-time or hourly workers. That’s because semi-monthly hours worked will vary each month, and overtime calculations become a lot more time-consuming — that is, unless you use software.
We recommend using scheduling and timekeeping software, like When I Work, that can keep track of both hours worked and your pay cycle. When I Work can manage overtime and then share that data with your payroll software. The scheduling tools on When I Work are free for small businesses with fewer than 75 employees.
Costs of Semi-Monthly Pay Schedules
The pay period itself doesn’t drive your costs, as pay cycles can be tracked on a spreadsheet or by using payroll software. In fact, most payroll providers can manage semi-monthly pay along with other common payroll time frames: daily, weekly, bi-monthly, or monthly. However, running a semi-monthly payroll cycle may require some investment of your time.
- Payroll Software – Payroll software starts at free up to about $15 per employee per month. Most interface with time and attendance software or your time clock.
- Labor – If you have hourly employees, you’ll need to track their time by week and upload or enter it into your payroll system to make sure that overtime is accounted for.
- Time and Attendance Software – These start at free and run up to about $5 per employee per month. Many, like Homebase (free), have interfaces into payroll software like Gusto.
- Payroll Runs – Traditional payroll software providers, like ADP and Paychex, charge extra for each payroll run; running payroll twice a month may save you money.
- Taxes – Free payroll programs may not manage tax payments, accruals, or timekeeping interfaces, so you’ll need to pay an accountant at a cost of $100 to $1,200 per month.
To run semi-monthly payroll at the lowest cost, it’s best to find a payroll provider that can interface with your timekeeping system. That saves time, as you run payroll each pay period. In addition, that payroll software will often render new hire reporting as well as federal, state, and local tax payments.
We recommend Gusto to small businesses looking for a payroll provider that’s half the cost of ADP. Gusto processes semi-monthly payroll, provides new hire onboarding paperwork, does new hire reporting, and handles all tax filing for you. It also interfaces with free scheduling and time tracking software Homebase. The two make a powerful workforce management system for small business, starting at only $45 per month.
Semi-Monthly Pay Features
Semi-monthly pay is comprised of payroll calculations that take into account all hours worked for a time period that typically runs 13 to 16 days in length. For example, semi-monthly pay each February may include 15 days in the first pay period of the month and only 13 days in the last pay period of the month, equaling 28 days most years.
Semi-monthly pay is more common in businesses that manage IT, finance, or professional service workers, and less common in construction, restaurant, retail, and service industries.
There are a few ways to do semi-monthly pay based on whether your workers are exempt or non-exempt and whether you pay them for hours worked or pay them a salary. Here are two semi-monthly pay options with examples:
Example of Semi-Monthly Pay for Hourly Non-Exempt Employee
Hal works hourly at $14 per hour (he’s a non-exempt employee and must be paid for any weekly overtime). He worked 87 hours in the time frame between the 1st and the 15th of the month. He is paid on the 16th for those hours worked. In addition to processing his pay for 11 work days in that time frame, his employer must determine whether Hal worked overtime (over 40 hours in a week) at any time during those two weeks. That’s because with semi-monthly pay, Hals standard work week most likely does not match his payroll cycle. Any hours worked over 40 in a given week must be paid at time and a half.
That means both Hal’s weekly hours worked and any weekly overtime calculations must take place in advance of running payroll every pay period. Unless you maintain both a timekeeping system and payroll software, doing these calculations each week and pay period for hourly employees can be time-consuming. Here’s how Hal’s semi-monthly pay would be calculated in this example, assuming he worked three hours of overtime in one of those weeks.
$14/hour x 87 = $1,218
$14/hour x 1.5 x # overtime hours worked in weeks
covered by pay period time frame from 1st – 15th of the month
(Example: Three hours overtime were worked this pay period = $63)
$1,218 + $63 (overtime pay) = $1,261 this pay period
Example of Semi-Monthly Pay for Salaried-Exempt Employee
Sal is a salaried employee paid an annual compensation of $50,000. Using semi-monthly pay, his company calculates his pay each pay period in the simplest way possible. They divide his annual salary by 24 (12 months x two pay periods a month), and that’s what he gets in his paycheck, consistently, every pay period.
$50,000 / 24 (semi-monthly pay periods) = $2,083 each pay period
As you can see by these two examples, semi-monthly pay is a much easier way to pay a salaried-exempt workforce. It can be done for hourly and non-exempt employees, but it’s more complicated due to the need to manage weekly overtime calculations and include those amounts in the semi-monthly pay.
Those with hourly workers might find weekly payroll or every other week payroll easier to manage, as it follows the same weekly time frames as employee work schedules and hours worked. Next, let’s look at other pros and cons.
Semi-Monthly Pay Providers
Like any other kind of payroll processing cycle, semi-monthly pay can be managed in several ways: by using free payroll software, outsourcing payroll, or by working with a professional employer organization (PEO).
We’ll describe each semi-monthly payroll provider along with vendors we recommend:
Free Payroll Software
Small businesses with only one or two employees that are paid semi-monthly may be able to get by with free payroll software. Free payroll software allows you to input your payroll hours and pay rate, and then it calculates a paycheck amount that you can use as a pay stub when you write paychecks to your employees twice a month. It’s free, but often has upcharges for tax filing, and generally requires you to do duplicate data entry on hours worked and pay rates.
Here are the best free payroll software providers and what they offer.
HR/payroll software does more than pay employees. It keeps track of employee data such as name, address, job title, and pay rate, and provides payroll processing so that your employees are paid correctly and on time. Payroll software can interface directly with your time clock or can use API to interface with your time and scheduling software. Most offer direct deposit.
We recommend Gusto as the best payroll software for small business due to its low cost, easy to set up-and-use software, and employee self-service options that allow your employees to view their pay stub and download year-end tax forms. You can even run payroll from your mobile phone using Gusto. Those features save you time.
Outsourced Payroll Vendor
If you prefer to outsource payroll, there are plenty of options from payroll software to full-service payroll providers. Here are some of the payroll outsourcing services we recommend.
Bookkeeper or Accountant
Some businesses prefer to work with a person or service that provides both accounting and payroll services. They can serve as your one-stop-shop for all things financial, including processing of your semi-monthly payroll. However, when you look for a bookkeeper or accountant, be sure they are aware of payroll laws in all states that you do business. That can help you prevent payroll and tax audits, as well as reduce potential fines and lawsuits.
We provide reviews of all the major payroll service providers for small business on our Reviews page. If there’s a vendor you’re considering, please check out our reviews to see what other small businesses say about that payroll provider before you commit to a contract.
Professional Employment Organization (PEO)
A PEO is a co-employer. Outsourcing to a PEO means that they, not you, process employee semi-monthly payroll and manage all employee taxes — including employee deductions and tax agency payments. A PEO is a great option if you want to give your employees the feel of working for a much larger firm, as they can provide benefit insurance options at reduced rates due to their buying power. PEOs cost from under $100 per month to hundreds per employee per month based the vendor and/or the service options you provide.
If you’re looking for a reliable PEO with decades of industry experience, consider working with ADP Total Source. It will manage employee pay and benefits along with numerous other HR-related tasks.
Pros & Cons of Semi-Monthly Pay
Employers who hire only exempt staff tend to like processing semi-monthly pay due to the cost savings. Employees who like to plan for a regular paycheck amount and regular pay date also like the structure of semi-monthly pay arriving twice a month, on the same dates. Here are the pros and cons to consider as you decide which payroll processing cycle may work best for your business.
Pros of Semi-Monthly Pay
Here are some nice benefits of offering semi-monthly pay:
- Predictable Payroll Costs – Businesses with exempt staff like that they can predict their payroll costs well in advance by dividing all employees’ salaries by 24 payroll cycles.
- Fewer Payroll Cycles to Run – Employers like processing fewer payroll cycles, i.e., (24) rather than 26 (bi-monthly) or 52 (weekly).
- Cost Savings – Employers using payroll software like ADP or Paychex, which charge per payroll run, will find they save money by processing fewer payroll runs.
- Paychecks Arrive Consistently – Employees like getting a paycheck on the same day of the month, either the 1st and 15th or 16th and 30th, typically.
- Paycheck Amounts Don’t Vary – Salaried employees like getting the same amount of pay each pay day; it helps them budget and allows them to plan for online bill payments.
There are many factors employers should consider when determining pay frequency, including regulatory requirements, employee population, and other benefits that are affected by pay frequency.
Employers may have a cleaner start and finish of payroll end dates in the calendar or fiscal year with semi-monthly pay if they end the payroll in a manner that coincides with their calendar or fiscal year. Additionally, some monthly benefits offered by employers, such as health benefits, may be easier to divide up when the employer only needs to divide the month by two and not allocate between months. Employer-shared responsibility calculation can become easier when the payroll does not cross months.
– Laurie Savage, Senior Compliance Analyst, Paychex
Cons of Semi-Monthly Pay
There are, however, some real downsides to offering semi-monthly pay, especially if you hire hourly workers:
- Labor Intensive for Hourly Workforce – Businesses with hourly non-exempt workers paid overtime may find semi-monthly pay calculations and data entry time-consuming.
- Pay Cycles Don’t Align with Work Weeks – Companies may find it confusing to explain payroll to workers whose pay and overtime don’t line up with their work schedule.
- Harder for Employees to Budget – Hourly workers may find it difficult to make ends meet when they’re only paid twice a month.
- State Regulations – Semi-monthly pay is not allowed in states that require some or all employees to be paid weekly; check your state government website for requirements.
- Must Pay Early – When the monthly pay date falls on a weekend, the business is obliged to run and pay employees on the prior business (work) day.
There are a few advantages to semi-monthly payroll. As an ongoing business process, the dates will typically fall at different times each month, and as such, allow some scheduling movement for the person who is responsible for processing and transmitting the payroll. In a bi-weekly scenario, the individual is tied to every other Wednesday, for example, with little flexibility.
More critical is that fact that you will always have exactly 24 pay periods a year. With the bi-weekly scenario, every few years there is a 27th payroll for the year, which causes chaos for those who are paid a salaried wage. This is unavoidable with the bi-weekly scenario, but not an issue with semi-monthly.
– Lori Kleiman, SPHR SHRM-SC, Managing Director, HR Topics
Alternatives to Semi-Monthly Pay
The good news is that there are several options to semi-monthly pay. The benefits and downsides of each are listed below. We hope these help you choose the best payment method for your employees. In fact, some businesses provide multiple pay types for different kinds of workers. For instance, they may pay their managers and office workers semi-monthly, while providing weekly pay to service workers and laborers.
Here are the most common alternatives to pay employees:
Weekly Pay Cycle
Weekly pay cycles are the most common for hourly workers and those in retail, restaurants, and service industries. Those workers get paid 52 times a year, as there are 52 weeks each year. In fact, not paying hourly may be a deal breaker for some employees who live paycheck to paycheck. And in states like New York and California, manual laborers and other worker types must be paid each week. Semi-monthly pay isn’t an option in those and other states that require employees be paid weekly, like Connecticut, California, and New Hampshire.
Bi-Weekly Pay Cycle
Bi-weekly pay means that you pay employees every two weeks. It’s actually the most common payroll pay cycle, according to the U.S. Bureau of Labor Statistics (BLS). It has an advantage over semi-monthly pay in that the payroll cycle aligns with workweeks, making overtime calculations simpler and reducing questions from employees about how their pay and overtime are calculated.
As businesses grow, more firms move from other pay cycles to a bi-weekly pay cycle. About 5% of businesses run multiple pay cycles, offering weekly pay where required by state law, and bi-weekly pay otherwise.
Monthly Pay Cycle
Monthly pay is the least common of all payroll pay cycles. It’s not allowed in many states, and even in states where it is an option, it’s often limited to higher compensated employees, such as executives. With monthly pay, you gather all hours worked the prior month, and then pay workers for those hours in the next month.
However, like semi-monthly pay, you also have to calculate hours worked for overtime purposes and then add that to your monthly payroll. Further, employees don’t like going 30 days or more between paychecks. If you hire only salaried employees, then this is the easiest, lowest cost way to pay employees, as you divide their annual salary by 12, and pay them that amount each month.
Frequently Asked Questions (FAQs) About Semi-Monthly Pay
Here are some common questions that employers and their staff ask about semi-monthly pay.
What’s the difference between semi-monthly pay & bi-weekly pay?
Here’s how I keep them straight. I remember that semi means part or half. So semi-monthly means half-monthly. That equates to getting paid half-a-month at a time (or two times a month). There are 24 pay dates in the year if you do payroll semi-monthly.
Bi means two. Therefore, bi-weekly means every two weeks. Some months it may result in two pay dates, and some months there may be three. Overall, there are 26 pay dates in a year if you run payroll bi-weekly.
Is bi-weekly better than semi-monthly?
If all your employees are salaried, semi-monthly may be easier and less costly to manage. However, if you have hourly workers who often work overtime, then bi-weekly may be better for you as it makes overtime calculations line up with your payroll time frames. Bi-weekly is the most common payroll cycle by a two-to-one margin as compared to semi-monthly, and as businesses grow, they tend to move away from semi-monthly to other pay periods.
How many hours are in a semi-monthly pay period?
The number of work hours in a semi-monthly pay period varies based on your business hours. For instance, if you’re open 8 a.m. to 5 p.m., Monday through Friday, with a one-hour lunch, your week will always be 40 hours and two weeks (or bi-weekly) will always be 80 hours. Unfortunately, semi-monthly hours aren’t that easy to calculate, as the number of days and hours varies each pay period.
When calculating compensable hours per semi-monthly pay period, you’ll need to determine the number of business hours per day, and then count the number of days per pay period, which may range from 13 to 16 days (as shown in the table at the top of this article).
For instance, let’s keep it simple and assume your business is open eight hours a day, seven days a week. In a standard 15-day pay cycle, that may equal a 120-hour pay period. However, if your business is open on weekends, or hours vary on different days of the week, you’ll need to count the number of work hours for every workday within that pay period (or have software do it for you) in order to determine how many compensable work hours are in each of the 24 semi-monthly pay periods.
Semi-monthly pay is a solid way for a business that employs salaried exempt staff to minimize their payroll efforts and even out the paychecks that workers receive. However, semi-monthly isn’t the most common pay period (bi-weekly is). And, it isn’t the easiest to manage if you have hourly, non-exempt workers who need to be paid overtime — unless you have software to manage the calculations.
Gusto can manage multiple pay cycles, do the payroll calculations for you, and comply with labor laws that differ from state to state. Plus, they charge per employee, not per payroll cycle, so you can set up as many different payroll cycles as needed — weekly for your part-time hourly staff, semi-monthly for your exempt team members, and even monthly for your sales commissions — all in one affordable and easy-to-use system.