The ABC Widget company paid its salaried employees each month 1/12 of their annual rate of pay. Then, on a month that began on a Sunday, they switched to paying them every other week 1/26 of their annual pay.
Alice said that works out worse for the employees, as in the first month, they'd get only 1/13 of their annual pay instead of 1/12.
Bob said "No, you're getting some of your money sooner by two weeks, more than making up for it, so that it's better for the employees."
Who is right?
The official posted solution has the right answer, but for the wrong reason. Larry's last post is the salient point.
The bi-weekly payroll pays 365.25 days of salary every 364 days. This is a .3434 % advantage over the monthly scheme.
This far overshadows the .0152% advantage due to the time value of money (assuming a 1% interest rate).
The real advantage is 24 times greater than the official solution indicates!
Edited on May 29, 2006, 1:50 pm
Not of interest
