How Is Bi-Weekly Pay Calculated? A Simple Breakdown

Bi-weekly pay refers to a compensation schedule where employees receive their wages every two weeks, typically on a consistent day of the week. This results in 26 paychecks over a year. This differs from semi-monthly pay, which involves receiving wages twice a month on fixed dates, leading to 24 paychecks annually. Understanding how your bi-weekly pay is calculated is important for personal financial management, as it clarifies the journey from your total earnings to the amount that reaches your bank account.

Determining Gross Bi-Weekly Pay

Gross bi-weekly pay represents the total earnings before any deductions are applied. For salaried employees, this amount is determined by dividing their annual salary by the 26 bi-weekly pay periods in a year. For instance, an employee with an annual salary of $52,000 would have a gross bi-weekly pay of $2,000 ($52,000 divided by 26).

Hourly employees’ gross pay is calculated by multiplying their hourly rate by the number of hours worked within the two-week pay period. If an hourly employee works more than 40 hours in a workweek, federal law mandates that those additional hours are compensated at an overtime rate, one and a half times their regular hourly rate. For example, an employee earning $20 per hour who works 80 regular hours in a pay period would earn $1,600, while working 85 hours would add $150 in overtime pay (5 hours x $20 x 1.5).

Understanding Payroll Deductions

After gross pay is determined, various payroll deductions are subtracted, leading to your net pay. These deductions fall into mandatory and voluntary categories, some of which reduce your taxable income.

Mandatory Deductions

Mandatory deductions are withholdings required by law. Federal income tax is one such deduction, and its amount is largely determined by the information provided on your Form W-4, Employee’s Withholding Certificate. This form allows you to inform your employer how much federal income tax to withhold from each paycheck.

Federal Insurance Contributions Act (FICA) taxes are another mandatory deduction, funding Social Security and Medicare programs. For 2025, the Social Security tax rate is 6.2% on wages up to an annual limit of $176,100. The Medicare tax rate is 1.45% on all wages, with no wage limit. Additionally, a 0.9% Additional Medicare Tax applies to wages exceeding $200,000 in a calendar year for individuals, with a higher threshold for those filing jointly. State and local income taxes are also withheld where applicable, depending on the employee’s location.

Voluntary Pre-Tax Deductions

Voluntary pre-tax deductions are elected by the employee and are subtracted from gross pay before income taxes are calculated. This reduces the amount of income subject to federal, state, and sometimes FICA taxes, thus lowering your overall taxable income. Common examples include contributions to a 401(k) retirement plan, which are generally capped annually by the IRS.

Health, dental, and vision insurance premiums are also frequently pre-tax deductions. Contributions to Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs) for medical expenses or dependent care are other typical pre-tax deductions. These deductions offer tax advantages by reducing the income on which taxes are levied.

Voluntary Post-Tax Deductions

Voluntary post-tax deductions are withheld from your pay after all applicable taxes have been calculated and subtracted. These deductions do not reduce your taxable income. Examples include contributions to a Roth 401(k) or Roth IRA, which are funded with after-tax dollars but offer tax-free withdrawals in retirement.

Other common post-tax deductions can include union dues, certain types of life or disability insurance premiums, or court-ordered wage garnishments for debts like child support or unpaid taxes. While these deductions do not offer immediate tax savings, they serve various financial security or obligation purposes.

Calculating Net Bi-Weekly Pay

Net bi-weekly pay is the final amount an employee receives after all deductions are subtracted from their gross pay. This is often referred to as “take-home pay.” The calculation follows a straightforward formula: Gross Pay minus Total Deductions equals Net Pay.

For example, if an employee’s gross bi-weekly pay is $2,000, and their total mandatory deductions (federal income tax, FICA) amount to $350, their pre-tax deductions (401(k), health insurance) total $100, and their post-tax deductions (Roth 401(k), union dues) are $50, the calculation would proceed sequentially. First, pre-tax deductions are subtracted from gross pay to determine taxable income. Then, mandatory taxes are calculated and subtracted from this reduced taxable income. Finally, post-tax deductions are removed. In this scenario, the total deductions would be $500 ($350 + $100 + $50), resulting in a net bi-weekly pay of $1,500 ($2,000 – $500).

Understanding Your Bi-Weekly Pay Statement

A bi-weekly pay statement, often called a pay stub, provides a detailed breakdown of your earnings and deductions for a specific pay period. At the top, you will typically find identifying information such as your name, employer’s name, the pay period dates, and the pay date. This section also states your gross pay for the current period.

The statement then itemizes all deductions, usually separating taxes (federal, state, local, FICA) from voluntary deductions (pre-tax and post-tax). Each deduction will show the amount withheld for the current pay period and often a year-to-date (YTD) total, which reflects the cumulative amount withheld since the beginning of the year.

Finally, the pay statement prominently displays your net pay, the actual amount deposited into your bank account or issued as a check. Some pay stubs also include employer contributions, such as the employer’s share of health insurance premiums or matching contributions to a 401(k) plan. Reviewing your pay statement regularly helps ensure the accuracy of your pay and deductions.