A semi-monthly payroll happens twice per month, usually around the middle and last day of the month. This can result in inconsistencies between paychecks, especially for those who work irregular hours, including overtime. In some cases, this can result in hourly employees being compensated for a different number of hours than what they actually worked.

Compensation Time Frame

State law generally dictates when employees are compensated. You may pay sooner than the required payday but not later. If payment must be made at least semi-monthly, the state might also limit the number of days that can occur between each payday.

For example, in Arizona, semi-monthly paydays must not be more than 16 days apart. State law might dictate when employees should be compensated if the payday falls on a holiday or weekend; normally, employees must be paid on the preceding business day.

Semi-monthly payrolls can be confusing for hourly workers, so some employers give employees payroll calendars that show pay period dates, time card submission dates and paydays.

Calculating for Nonexempt Employees

Nonexempt employees are usually hourly workers who qualify for overtime. The number of regular and overtime hours that semi-monthly nonexempt employees work in a period varies from the number of hours paid on that payday.

For example, to allow enough time for payroll processing, pay period start and end dates for August 30 payroll could respectively be August 6 and 19. In this case, the employee gets paid for 14 days.

To balance out any shortages, you may compensate employees for three weeks on a few other paydays. Since there is a difference between the employee’s payday and her total hours worked, if she’s terminated, she’s likely due final wages.

For example, if she’s terminated on August 30, her final paycheck would include hours worked from August 20 through August 30.

Salary Calculations for Exempt Employees

Exempt employees are usually salaried employees who don’t qualify for overtime. These employees are usually put on a 40-hour workweek. To figure hours for a semi-monthly salaried employee, multiply 40 hours by 52 weeks, which comes to 2,080 hours. Then, divide 2,080 by 24 annual semi-monthly pay periods to arrive at 86.67 hours for the pay period.

To figure salary for the pay period, divide annual salary by 24 semi-monthly pay periods. Since these employees are paid current, if they are terminated at the end of the pay period, you don’t have to pay them final a salary, unless they are due other types of compensation such as severance or vacation pay.

Another Option for Adjusting

Some employers pay semi-monthly nonexempt employees 86.67 hours and estimated overtime each pay period, then make adjustments on the next payroll. This process can be risky if an employee quits and doesn’t have enough hours to offset the estimated time paid.