An employer may switch from a semi-monthly to a bi-weekly pay frequency for several reasons, but most commonly due to budgetary concerns, or because of a merger or acquisition. Regardless of the reason, there are several details that must be adjusted as a result of the new pay frequency, to ensure that each employee receives the proper amount of compensation, deductions and benefit funds.
Update the pay frequency code in the payroll processing software that your business uses to ensure that the number of pay periods is changed from 24 to 26. Employees who are paid on a semi-monthly basis are paid twice a month on designated dates, such as the first and 15th of each month, resulting in 24 pay periods for the year. Employees who are paid bi-weekly receive paychecks every two weeks, resulting in 26 paydays within a 12-month period.
Recalculate the vacation, sick or personal leave accrual rate per pay period. Because the number of pay periods has increased, the amount of paid leave accrued each pay cycle will decrease. For example, an employee who accrued eight hours of paid leave per payday under a bi-monthly system will now accrue 7.385 hours of leave per bi-weekly pay period.
Adjust all payroll deduction amounts for items such as health insurance premiums, meal plans or garnishments to ensure that the proper amount is deducted as a result of the increase in pay periods under the bi-weekly pay frequency.
Communicate the changes to all affected employees in advance so they can prepare for the adjustment in their pay dates and individual net paycheck amounts. This can be done via email, memorandum or on-site meetings.
- Distributing an updated payroll calendar or schedule can help to minimize employee confusion during the inital pay frequency transition.
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