If your company pays weekly or bi-weekly, will you have an extra check date this year? In other words, if your company pays weekly, will you pay your employees 52 times this year or 53? Likewise, if your company pays bi-weekly, will you pay your employees 26 times this year or 27? The 27th/53rd additional pay date occurs every 5 or 6 years if you pay weekly and every 11 years if you pay bi-weekly. The easiest way to understand why these additional pay dates occur is to review a calendar:
- If you pay weekly, there are 7 days in a pay period: 7 days x 52 weeks = 364 days
- If you pay bi-weekly, there are 14 days in a pay period: 14 days x 26 weeks = 364 days
Combine the extra day left over year after year, coupled with the extra day from leap year every 4 years, and you have an issue to deal with every 5-6 years or every 11 years depending on your pay frequency.
Please note that this is only an issue that affects salaried employees who are paid weekly or bi-weekly because they make more than their annual salary in those years with an extra pay period. This issue does not affect any salaried employees who are paid on a semi-monthly basis or any hourly employees.
Resolving the 27th/53rd additional pay date issue can be a complicated process. According to the American Payroll Association, there are essentially four methods to deal with the extra pay period:
- Do nothing and make the extra payment every 5-6 or 11 years depending on your pay frequency.
- Recalculate each employee’s pay amount in the year of occurrence.
- Change the payroll divisor to adapt for additional days in the calendar.
- Change your payroll cycle to semi-monthly.
To learn more in-depth information about each method, please visit AmericanPayroll.org. Each option has its own inherent pros and cons. The appropriate consultation needs to be conducted with your company’s accountant, bookkeeper, financial personnel and/or lawyer to decide which method is best suited for your company.
Please note that according to IRS Publication 15, in calculating income tax withholding, “Adjustments are not required when there will be more than the usual number of pay periods, for example, 27 biweekly pay dates instead of 26.” So no adjustment to withholding is required for those years in which employees are paid an extra time.
We do not offer advice to customers as to what they should do to deal with this issue other than to make them aware of the options available to resolve it. Whatever the final decision, make sure it is clearly communicated to your employees for their own understanding.