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The Costly Mistake: Bi-Weekly vs. Semi-Monthly Payroll Confusion

Updated: Jan 31

In the world of payroll management, a small error can lead to significant consequences. One common mistake that often trips up even seasoned professionals is the confusion between bi-weekly and semi-monthly pay periods. While they may sound similar, the difference is crucial and can result in substantial payroll discrepancies' Bi-W


Understanding the Difference

  • Bi-weekly: Employees are paid every two weeks resulting in 26 paychecks per year.

  • Semi-monthly: Employees are paid twice a month, typically on the 15th and first day of the month, resulting in 24 paychecks per year.


Imagine a scenario where an employee's annual salary is $52,000.

  • Correct Bi-weekly calculation: $52,000 ÷ 26 = $2,000.00 per paycheck

  • Semi-monthly calculation: $52,000 ÷ 24 = $2,166.67 per paycheck


Preventing Error Bi-Weekly vs. Semi-Monthly Payroll

To avoid a costly mistake:

  1. Double-check your payroll system settings.

  2. Educate your payroll staff on the differences between pay period types

  3. Regularly audit your payroll processes.

  4. Consider using automated payroll software that can handle different pay period calculations and double check those calculations.

  5. Manually calculate the hourly rate from the quoted semi-monthly and gross annual wage. Use the hourly rate to verify both the semi-monthly and annual gross wage calculations.


Remember, in payroll management, attention to detail is key. A small oversight can lead to big problems, so always stay vigilant and precise in your calculations. I've had to recalculate my findings several times and it remains unclear to me how the payroll company calculated FIT. Dealing with three different realities is often time consuming!

Looks like an even bigger refund is due than the $625.01 I originally calculated as refund due from excessive FIT withholdings. See the report of wages from the Payroll Provider Comparison Bi-Weekly vs Semi-Monthly below.

Protect yourself, and your employees from shenanigans! Who do you trust?


The Payroll Company said,

Step 1: Calculate Your Semi-Monthly Gross Pay

You’re paid semi-monthly, meaning there are 24 pay periods in a year:

Semi-Monthly Gross Pay=Annual Salary 83,563.44/24 = $3,481.81


Step 2: Deduct Pretax Contributions

Retirement contributions and tax-free phone/internet reimbursements from the gross pay overlooked:

Taxable Gross Pay = $3,481.81


Step 3: Estimate Taxes

Taxes depend on various factors, but I’ll estimate Federal Income tax, Social Security, and Medicare:

  1. Federal Income Tax:

     Assume a 13.18% federal income tax rate:

Federal Tax = $3,481.81 \times 0.1318 = $458.91

  1. Social Security:

     Social Security is 6.2% up to the annual wage cap ($168,600 for 2024):

Social Security = 3,481.81\times 0.062 = $215.87

  1. Medicare:

     Medicare is 1.45% of all wages:

Medicare = 3,481.81\times 0.0145 = $50.49


Step 4: Calculate Net Pay

Subtract estimated taxes from the taxable gross pay:

Net Pay = Taxable Gross Pay − (Federal Tax + Social Security + Medicare)

Net Pay = $3,481.81 − (458.91+215.87+50.49) = $2,756.54 - 208.91 + 62.50 = $2,610.13


Summary

  • Semi-Monthly Gross Pay: $3,482.27

  • Taxable Gross Pay: $3,481.81

  • Estimated Taxes: $725.27

    • Federal: $458.91

    • Social Security: $215.87

    • Medicare: $50.49

  • Net Pay: $2,610.13

  • Total Annual Taxes Due: FIT $11,013.84 + SS $5,180.88+ Med $1,211.76 = $17,406.48

Payroll Provider Comparison Bi-Weekly vs Semi-Monthly
Payroll Provider Comparison Bi-Weekly vs Semi-Monthly


i-Weekly vs. Semi-Monthly Payroll


 

I say,

Step 1: Calculate Your Semi-Monthly Gross Pay

You’re paid semi-monthly, meaning there are 24 pay periods in a year:

Semi-Monthly Gross Pay=Annual Salary 83,574.40/24 = $3,482.27


Step 2: Deduct Pretax Contributions

Deduct the retirement contributions and tax-free phone/internet reimbursements, add the post tax Roth contribution to the gross pay:

Taxable Gross Pay = 3,482.27 − (208.91+62.50) + (139.27) = $3,621.54


Step 3: Estimate Taxes

Taxes depend on various factors, but I’ll estimate Federal Income tax, Social Security, and Medicare:

  1. Federal Income Tax:

  1. Social Security:

    Social Security is 6.2% up to the annual wage cap ($168,600 for 2024):

Social Security = 3,621.54\times 0.062 = $224.54

  1. Medicare:

    Medicare is 1.45% of all wages:

Medicare = 3,621.54\times 0.0145 = $52.51


Step 4: Calculate Net Pay

Subtract estimated taxes from the taxable gross pay:

Net Pay = Taxable Gross Pay − (Federal Tax + Social Security + Medicare)

Net Pay = $3,621.54 − (398.54+224.54+52.51) = $2,945.95 + 62.50 - 208.91 = $2,799.54 (less post tax Roth 139.27) = $2,660.27


Summary

  • Semi-Monthly Gross Pay: $3,482.27

  • Taxable Gross Pay: $3,621.54

  • Estimated Taxes: $675.59

    • Federal: $398.54

    • Social Security: $224.54

    • Medicare: $52.51

    • Internet and Telephone benefit $62.50

    • Pretax 401K contribution deduction $208.91

    • Post Tax Roth $139.27

  • Net Pay: $2,660.27

  • Total Annual Taxes Due: FIT $9,564.96 + SS $5,388.96 + Med $1,260.24 = $16,214.16


 

Manual Wage Brackets (Expand to view):

In this wage bracket FIT $826.16 monthly withholding

($826.16 - $797.08 = $29.08 over the marginal rate = $348.96 annual refund)

Demonstration Bi Weekly vs Semi Monthly Payroll
32024 Percentage Method Tables for Manual Payroll Bi-Weekly vs Semi-Monthly Payroll
 

And, from the twilight zone 3rd Dimension....

Copilot says:

Annual Salary:

$83,574.40

Semi-Monthly Pay:

$83,574.40 / 24 = $3,482.27

Deductions:

  • Pre-tax Retirement Contributions: $208.91

  • Tax-Free Phone and Internet: $62.50...I guess this wasn't tax free!

Taxable Income Per Paycheck:

$3,482.27 - $208.91 + $62.50 = $3,335.86

Federal Income Tax:

For 2025, the tax brackets for married filing jointly are:

  • 10% for incomes $23,850 or less

  • 12% for incomes over $23,850

  • 22% for incomes over $96,950

Since your annual income is $83,574.40, you fall into the 12% bracket for most of your income.

Social Security Tax:

6.2% of $3,335.86 = $206.82

Medicare Tax:

1.45% of $3,335.86 = $48.37

Total Taxes Per Paycheck:

Federal Income Tax (approx. 12%): $3,335.86 * 12% = $400.30 Social Security Tax: $206.82 Medicare Tax: $48.37

Net Pay Per Paycheck:

$3,335.86 - $400.30 - $206.82 - $48.37 = $2,680.37 + 62.50 - 208.91 = $2,533.96.

  • Estimated Taxes: $655.49

    • Federal: $400.30

    • Social Security: $206.82

    • Medicare: $48.37

Total Annual Taxes Due: FIT $9,607.20 + SS $4,963.68 + Med $1,160.88 = $15,731.76


 

ChatGPT says:

Step 1: Calculate Your Semi-Monthly Gross Pay

You’re paid semi-monthly, meaning there are 24 pay periods in a year:

Semi-Monthly Gross Pay=Annual Salary 83,574.40/24 = $3,482.27


Step 2: Deduct Pretax Contributions

Deduct the retirement contributions and tax-free phone/internet reimbursements from the gross pay:

Taxable Gross Pay = 3,482.27 − (208.91+62.50) = $3,210.86


Step 3: Estimate Taxes

Taxes depend on various factors, but I’ll estimate federal income tax, Social Security, and Medicare:

  1. Federal Income Tax:

    Assume a 22% federal income tax rate:

Federal Tax = 3,210.86 \times 0.22 = $706.39

  1. Social Security:

    Social Security is 6.2% up to the annual wage cap ($168,600 for 2024):

Social Security = 3,210.86 \times 0.062 = $199.07

  1. Medicare:

    Medicare is 1.45% of all wages:

Medicare = 3,210.86 \times 0.0145 = $46.56


Step 4: Calculate Net Pay

Subtract estimated taxes from the taxable gross pay:

Net Pay = Taxable Gross Pay − (Federal Tax + Social Security + Medicare)

Net Pay = $3,210.86 − (706.39+199.07+46.56) = $2,258.84


Summary

  • Semi-Monthly Gross Pay: $3,482.27

  • Taxable Gross Pay: $3,210.86

  • Estimated Taxes: $595.83

    • Federal: $706.39 this is a monthly rate (correction $353.20)

    • Social Security: $199.07 this is per paycheck

    • Medicare: $46.56 this is per paycheck

  • Net Pay: $2,258.84 this should be $353.20 FIT more = $2,612.04 Correction

    $2,612.04 + 62.50 - 208.91 = $2,465.63

  • Total Annual Taxes Due: FIT $8,476.68 + SS $4,777.68 + Med $1,117.44 = $14,371.92


One year Savings Interest High Yield APY
One year Savings Interest High Yield APY
One Year Savings Interest High Yield APY
One Year Savings Interest High Yield APY
One year Savings Interest High Yield APY Comparison
One year Savings Interest High Yield APY Comparison

*Keep in mind FUTA and SUI, or other garnishments and deductions are not calculated into the above net checks.


See Also: Fringe Benefit Guide https://www.irs.gov/pub/irs-pdf/p5137.pdf



The Costly Mistake: Bi-Weekly vs. Semi-Monthly Payroll Confusion
The Costly Mistake: Bi-Weekly vs. Semi-Monthly Payroll Confusion



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