What Is Semi Monthly Payroll? A Guide for Employers

When it comes to managing payroll, every business must decide how often employees will be paid. While weekly and biweekly payrolls are common, many companies choose a semi-monthly payroll schedule for its balance of efficiency and consistency.

But what exactly does semi-monthly payroll mean? How does it work? And most importantly — is it the best fit for your business?

In this comprehensive guide, we’ll break down everything you need to know about semi-monthly payroll, including how it differs from other pay schedules, its pros and cons, and how a PEO (Professional Employer Organization) can simplify payroll management for your company.

What Is Semi-Monthly Payroll?

Semi-monthly payroll means that employees are paid twice a month, usually on fixed dates — for example, on the 15th and the last day of each month.

This means there are 24 pay periods in a year (12 months × 2 pay periods per month).

It’s important not to confuse semi-monthly with biweekly payroll. While both involve two paychecks per month on average, the difference lies in how often those paychecks occur.

• Semi-monthly: 24 paychecks per year (fixed dates like 15th and 30th)

• Biweekly: 26 paychecks per year (every two weeks, regardless of the date)

Example of Semi-Monthly Payroll Schedule

As you can see, the pay dates are tied to specific days of the month, not specific days of the week.

How Does Semi-Monthly Payroll Work?

Under a semi-monthly payroll schedule, an employee’s monthly salary is divided evenly between the two pay periods.

For example, if an employee earns $4,000 per month, they’ll receive:

• $2,000 on the 15th, and

• $2,000 on the last day of the month.

For hourly employees, payroll calculations may require additional attention, since the number of workdays between pay periods can vary. Employers need accurate time-tracking systems to ensure that every hour worked is recorded correctly.

Payroll Calculation Example

Let’s say:

• Hourly rate: $20/hour

• Hours worked from 1st–15th: 80 hours

• Hours worked from 16th–30th: 88 hours

Then:

• First paycheck: $20 × 80 = $1,600

• Second paycheck: $20 × 88 = $1,760

Total pay for the month = $3,360

Why Do Some Companies Choose Semi-Monthly Payroll?

The semi-monthly schedule is often preferred by companies that pay salaried employees, particularly those in professional services, finance, or administration.

Here’s why:

1. Predictable and consistent — Since the dates are fixed, it’s easy for employees to plan their finances.

2. Simpler accounting — Payroll aligns with monthly expenses, making it easier to handle deductions like health insurance and benefits.

3. Reduced payroll processing costs — Compared to weekly or biweekly payroll, fewer processing cycles save time and money.

If your business has both salaried and hourly employees, semi-monthly payroll can be efficient — but it must be managed carefully to ensure accuracy for variable-hour workers.

Semi-Monthly vs. Biweekly Payroll: What’s the Difference?

Many business owners confuse these two pay schedules because they both involve paying employees twice per month on average. However, there are some key distinctions that can affect your payroll management and cash flow.

Which Is Better?

• For salaried employees: Semi-monthly is often easier and cleaner.

• For hourly or shift-based workers: Biweekly might be better, since it matches the workweek structure (usually Monday–Sunday).

Advantages of Semi-Monthly Payroll

Switching to a semi-monthly payroll schedule can bring significant advantages for both employers and employees. This pay structure not only streamlines financial management but also helps reduce the administrative burden on your HR and accounting teams.

1. Streamlined Financial Planning

With a semi monthly pay period, employees receive their paychecks on consistent, predictable dates—typically on the 15th and the last day of the month. This predictability makes it easier for them to plan monthly expenses like rent, utilities, and loan payments. As a result, employees experience less financial stress and greater satisfaction, leading to improved morale and productivity at work.

2. Easier Integration with Monthly Accounting

Most company expenses—such as rent, insurance premiums, and utility bills—are due on a monthly basis. A semi monthly pay schedule aligns seamlessly with this cycle, simplifying bookkeeping and cash flow management. Your accounting department will find it easier to reconcile payroll expenses with monthly financial statements, ensuring cleaner records and more accurate financial forecasting.

3. Lower Payroll Processing Costs

Because semi-monthly payroll includes 24 pay periods per year (instead of 26 for biweekly), businesses can save time and money. Fewer pay runs mean less administrative work, lower transaction fees, and reduced data entry errors. This cost-saving structure can be especially beneficial for small and mid-sized companies looking to optimize their payroll operations without sacrificing accuracy.

If you ever need to calculate semi monthly pay, simply divide an employee’s total annual salary by 24. This gives you the amount they’ll earn each pay period under a semi-monthly payroll setup.

4. Simplified Benefits Administration

Benefits like health insurance, retirement plan contributions, and wage garnishments are typically billed or deducted monthly. Semi-monthly payroll makes it easier to manage these deductions because they occur on a predictable twice-per-month basis. This ensures accurate benefits tracking and fewer administrative headaches for your HR or payroll team.

When managed through a PEO (Professional Employer Organization), these deductions can be fully automated—saving even more time while maintaining compliance with federal and state regulations.

5. Time Efficiency for HR and Payroll Teams

With fewer payroll cycles to process each year, your HR management team can devote more time to high-value strategic initiatives such as employee engagement, talent development, and compliance improvement. A semi-monthly schedule allows HR staff to move away from repetitive data entry and focus on initiatives that help your business grow.

Disadvantages of Semi-Monthly Payroll

While semi-monthly payroll has many advantages, it’s not ideal for every business. Here are some drawbacks to consider.

1. Complex for Hourly Employees

Tracking and calculating hours worked can be tricky because pay periods might split workweeks. For example, one pay period could end mid-week, requiring careful time-tracking and overtime calculations.

2. Varied Pay Dates

If a pay date falls on a weekend or holiday, payroll must be processed earlier — requiring extra planning and coordination.

3. More Challenging for Timekeeping Systems

Some payroll systems are designed for weekly or biweekly schedules. If your software doesn’t support semi-monthly setups, manual adjustments may be needed.

4. Confusion Among Employees

Employees accustomed to biweekly pay might initially feel confused about semi-monthly timing, especially when paydays fall on different weekdays each month.

How to Set Up a Semi-Monthly Payroll Schedule

Setting up semi-monthly payroll correctly from the start helps prevent compliance issues and employee frustration. Here’s how to do it step-by-step:

Step 1: Choose Pay Dates

Select two fixed dates per month, such as the 15th and the last day. If those dates fall on weekends or holidays, establish a clear policy about paying on the previous business day.

Step 2: Communicate with Employees

Transparency is key. Notify your team in advance about:

• New pay dates

• How pay is calculated

• When they’ll receive their first semi-monthly check

Step 3: Update Payroll Software

Make sure your payroll software supports semi-monthly scheduling. Most modern systems like ADP, Gusto, or Paychex allow this customization easily.

Step 4: Adjust Benefit Deductions

Since deductions will now occur 24 times per year, adjust the amounts accordingly to maintain correct annual totals for things like health insurance or retirement contributions.

Step 5: Ensure Legal Compliance

Each state has its own payroll frequency laws. Some states may require specific pay schedules for certain employee types. Always check with your HR or legal advisor to stay compliant.

Payroll Compliance: What You Must Know

Payroll frequency regulations vary from state to state. For example:

• California allows semi-monthly pay for most employees.

• New York requires weekly pay for manual workers.

Failing to comply with state wage laws can lead to penalties, audits, and employee disputes.

That’s why many companies partner with a PEO or HR outsourcing provider like NetPEO. PEOs specialize in compliance management, ensuring that your payroll practices meet state and federal labor laws — without extra burden on your HR team.

How a PEO Can Simplify Semi-Monthly Payroll

Switching to or managing a semi-monthly payroll can be complex, especially for growing businesses. A PEO (Professional Employer Organization) helps by handling payroll, tax filings, and compliance on your behalf.

Through NetPEO’s national network of top-rated PEO partners, your business can access tailored solutions to streamline every aspect of payroll.

Here’s how NetPEO helps:

✅ 1. Automated Payroll Processing

PEOs use advanced software to automate your semi-monthly payroll runs, ensuring accuracy and timely payments every time.

✅ 2. Tax Filing and Compliance

Payroll taxes are automatically calculated, withheld, and filed with the correct agencies — reducing the risk of errors and penalties.

✅ 3. Benefits Administration

PEOs also manage employee benefits like health insurance, retirement plans, and workers’ compensation, ensuring all deductions align with your payroll schedule.

✅ 4. Custom Solutions

Whether you prefer semi-monthly, biweekly, or weekly payroll, NetPEO connects you with providers who offer the flexibility you need.

✅ 5. Expert Support

Payroll mistakes can be costly. With a PEO, you get dedicated payroll specialists to assist with wage disputes, deductions, and compliance questions.

Common Mistakes to Avoid with Semi-Monthly Payroll

Even seasoned employers can make mistakes when transitioning to or managing semi-monthly payroll. Here are the most common errors to avoid:

1. Incorrect Pay Calculations — Miscounting days in each pay period can result in overpayment or underpayment.

2. Skipping Weekend Adjustments — Failing to pay early when payday falls on a weekend or holiday can violate labor laws.

3. Neglecting Overtime Rules — If hourly employees are included, ensure overtime is calculated based on actual workweeks, not pay periods.

4. Using Incompatible Software — Some payroll tools don’t handle semi-monthly pay efficiently; choose software that supports it.

5. Poor Communication — Always explain the schedule clearly to avoid confusion and frustration among employees.

Semi-Monthly Payroll FAQs

1. How many pay periods are in a semi-monthly schedule?

There are 24 pay periods per year (two per month).

2. Can I pay hourly employees semi-monthly?

Yes, but it requires precise time tracking to ensure correct calculations.

3. Is semi-monthly payroll legal in all states?

Most states allow it, but some have restrictions. Always confirm your state’s labor laws.

4. What happens if payday falls on a weekend or holiday?

Typically, employees are paid on the previous business day to stay compliant.

5. Can I switch from biweekly to semi-monthly?

Yes, but it’s important to communicate the change clearly and ensure all benefit deductions are adjusted accordingly.

Should Your Business Choose Semi-Monthly Payroll?

Here’s a quick guide to help you decide:

Choose Semi-Monthly If:

• You primarily employ salaried workers

• You want to align payroll with monthly accounting cycles

• You prefer fewer payroll processing runs per year

Avoid Semi-Monthly If:

• Most of your employees are hourly or shift-based

• You want consistent paydays (e.g., every other Friday)

• Your payroll system isn’t flexible with date-based schedules

Ultimately, there’s no one-size-fits-all answer. The right payroll frequency depends on your workforce type, accounting preferences, and compliance requirements.

Simplify Payroll with NetPEO’s Trusted PEO Partners

Payroll management doesn’t have to be stressful — especially when you have the right partner.

At NetPEO, we help business owners like you connect with the best PEOs in the country that specialize in:

• Payroll processing

• Tax compliance

• HR management

• Employee benefits administration

• Workers’ compensation

Whether you want to implement a semi-monthly, biweekly, or custom payroll structure, our team will match you with the right provider to handle everything efficiently.

By partnering with NetPEO, you’ll save time, reduce compliance risks, and focus on what really matters — growing your business.

Final Thoughts

Semi-monthly payroll offers a perfect balance of predictability and efficiency — especially for businesses with salaried employees. However, it requires accuracy, compliance, and a reliable payroll system.

If managing payroll feels overwhelming, it might be time to explore outsourcing through a PEO partnership.

NetPEO makes it easy to compare top-rated PEO providers across the nation — so you can find one that fits your payroll needs, budget, and business goals.

💡 Ready to Simplify Payroll Management?

Let NetPEO help you find the best PEO partner for your semi-monthly payroll needs.

👉 Fill out the form & Get a Free Payroll Consultation Today

Discover how simple and stress-free payroll can be with the right PEO by your side.