Employers should consider biweekly payroll implications
Biweekly pay schedules typically produce 26 pay periods per year, generally resulting in two paychecks a month. Because of a calendar anomaly, it’s possible employees may receive 27 paychecks this year rather than the standard 26. While it’s still early in the year, payroll professionals need to plan how to address this once-in-a-decade phenomenon. Employee communication is important given the approach taken affects reported W-2 income and benefit and 401(k) deductions.
What’s the difference this year?
For many companies, the first payday of the year was Friday, January 2. Based on a biweekly schedule, the last payday for work performed in 2026 falls on Friday, January 1, 2027, also a bank holiday. So, employers either issue a 27th paycheck in 2026 prior to the holiday, or delay payment until the first of 2027.
Calculating exempt salary paycheck amounts
Employers may opt to retain the regular paycheck amount for exempt salaried employees for all 27 pay periods, resulting in easier administration but higher annual compensation for employees. Another method, less favorable to employees but consistent with established annual pay rates, is to recalculate employee paycheck amounts. This maintains annual salary amounts, but the reduced net pay per paycheck will need to be communicated to employees.
Benefit deductions
If your organization deducts employee benefit contributions each pay period, deductions may be calculated to account for the 27th pay period. A 26-deduction period could also be maintained to, giving employees a deduction-free pay period. Bukaty Companies clients utilizing Employee Navigator can enjoy the ease of personalized, hassle-free benefit administration. Our cloud-based platform can pivot to your organization’s needs, accommodating pay period options and more.
401(k) contributions
An additional paycheck may result in employees exceeding the IRS-set 401(k) contribution threshold. Ensure your organization is partnering with the right payroll provider to avoid penalties. Bukaty Companies Payroll & Accounting platform has essential safeguards built in to prevent deductions that exceed IRS limits.
Bukaty Companies’ suite of services is designed with employer ease in mind. From employee benefits plan design to payroll administration, leverage our team’s capabilities to elevate your organization.
