The Costly Mistake: Bi-Weekly vs. Semi-Monthly Payroll Confusion
- Priscilla Wolfe
- Aug 28, 2024
- 6 min read
Updated: 2 days ago
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 ($25 per hour)
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:
Double-check your payroll system settings.
Educate your payroll staff on the differences between pay period types
Regularly audit your payroll processes.
Consider using automated payroll software that can handle different pay period calculations and double check those calculations.
Manually calculate the hourly rate from the quoted semi-monthly or bi-weekly rate and gross annual wage. Use the hourly rate to verify both the semi-monthly or bi-weekly 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!
Any typos have been corrected and correct calculations are presented in the spreadsheets below. See the 2024 Wage Calc Full Screen pdf for details, followed by demonstration of corrections in the Payroll Comparisons pdf(s) to find out what the true gross wage and taxable gross wage is.
Protect yourself and your employees with regular payroll reviews.
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: Calculate Gross Taxable Pay
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:
Federal Income Tax:
Assume a 13.18% federal income tax rate:
Federal Tax = $3,481.81 \times 0.1318 = $458.91
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
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: $3,481.81
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
*Excel calculations maybe slightly off
$62.50 not included in taxable wage calculation
$62.50 included in taxable wage calculationi-We$62.50ekly vs. Semi-Monthly Payroll
Bookkeeping Business Online says, (contact us for monthly payroll services)
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: Calculate Gross Taxable pay
Deduct the retirement contributions and tax-free phone/internet reimbursements, from the gross pay:
Taxable Gross Pay = 3,482.27 - non taxable (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:
Federal Income Tax:
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
Medicare:
Medicare is 1.45% of all wages:
Medicare = 3,210.86\times 0.0145 = $46.55
Step 4: Calculate Net Pay
Subtract estimated taxes from the taxable gross pay:
Net Pay = Taxable Gross Pay − (Federal Tax + Social Security + Medicare) + Benefits
Net Pay = $3,482.27 − (398.54+199.07+46.55) = $2,838.31 + 62.50 - 208.91 = $2,691.90
Summary
Semi-Monthly Gross Pay: $3,482.27
Taxable Gross Pay: $3,210.86
Estimated Taxes: $659.60
Federal: $398.54
Social Security: $199.07
Medicare: $46.55
Non taxable Internet and Telephone benefit $62.50
Pretax 401K contribution deduction $208.91
Post Tax 401K $139.27 (Information Not Available for EE contribution)
Net Pay: $2,691.90
Total Annual Taxes Due: FIT $9,564.96 + SS $4,777.68 + Med $1,117.20 = $15,459.84
Manual Wage Brackets (Expand to view):
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:
Federal Income Tax:
Assume a 22% federal income tax rate:
Federal Tax = 3,210.86 \times 0.22 = $706.39
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
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
And from GPT4o
To calculate your gross wage, taxable wage, and net wage per paycheck, we can break it down step by step.
1. Gross Wage
The gross pay is given as $83,574.40 for the year. Since there are 24 pay periods, we can calculate the gross wage per paycheck:
Gross Wage per Paycheck=Number of Pay Periods
Annual Gross Pay=83,574.40/24≈3,482.35
2. Taxable Wage
To find the taxable wage, we need to subtract the non-taxable amounts from the gross wage. The non-taxable amounts are:
Non-taxable Roth: $208.91
Non-taxable Telephone Benefit: $62.50
Total non-taxable amounts:
Total Non-Taxable=208.91+62.50=271.41
Now, we can calculate the taxable wage:
Taxable Wage=Gross Wage−Total Non-Taxable=3,482.35−271.41≈3,210.94
3. Net Wage
To calculate the net wage, we need to deduct Social Security and Medicare taxes from the taxable wage.
Social Security Tax: 6.2% of the taxable wage
Medicare Tax: 1.45% of the taxable wage
Calculating the taxes:
Social Security Tax=0.062×3,210.94≈199.31
Medicare Tax=0.0145×3,210.94≈46.49
Total taxes:
Total Taxes=Social Security Tax + Medicare Tax=199.31+46.49≈245.80
Now, we can calculate the net wage:
Net Wage=Taxable Wage−Total Taxes=3,210.94−245.80≈2,965.14
Summary
Gross Wage per Paycheck: $3,482.35
Taxable Wage per Paycheck: $3,210.94
Net Wage per Paycheck: $2,965.14
These calculations provide a clear breakdown of your wages per paycheck.
*Keep in mind FUTA and SUI, or other garnishments and deductions are not calculated into the above net checks.
See Also: Prior Year Publication 15-T
See Also: Fringe Benefit Guide
See Also: Employee Reimbursed Expenses
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