Don't Let 2026 Wreak Havoc With Payroll
Some companies pay employees weekly. Others pay twice a month. Every other week is also popular. Company policies, industry traditions, and state and federal regulations all play a role in choices. Usually everything works out for everyone, but 2026 is special. Thanks to a rare calendar quirk, every-other-week companies are facing some hard choices.
At first, the math looks simple: 52 weeks a year, divided by 2, equals 26 paychecks a year. However, that means a slight discrepancy of one day in normal years or two days in leap years because a 14-day period does not divide evenly into 365 or 366. Those discrepancies add up, and about every 11 years, they add an extra payday.
So What Happens?
In 2026, a biweekly company might start its first payday of the year on Jan. 2 and issue its 26th and supposedly final paycheck on Dec. 18. The next paycheck should be Jan. 1, 2027. But that’s a legal holiday — so the employee should be paid on Dec. 31. That’s 27 paychecks.
Companies usually budget for a year’s worth of salaries. But this extra paycheck throws this off. Take someone who earns $78,000 a year. The employee gets a gross paycheck of $3,000 every two weeks: $3,000 x 26 = $78,000. But with that Dec. 31 paycheck, that employee earns an extra $3,000. Multiply that extra by even a dozen employees and you’re talking about real money.
The most obvious solution is changing the previous “divide by 26” formula to “divide by 27” for 2026. But this isn’t perfect. Even after companies explain it, employees may be emotionally unprepared to see that each paycheck is now slightly less. Sometimes, state rules require companies to notify employees well in advance about such changes.
There’s also an issue regarding money taken out for benefits and 401(k) plans, for example. How do you account for these in a 27-period year? Companies can easily run into complex federal and state rules with such changes.
Also, even this relatively small change could send some employees below federal or state thresholds that divide exempt from nonexempt, making them eligible for overtime. Even if a company decides to go with this solution, it may face accounting issues
The bottom line
So what to do? Pick up your phone and call your payroll professional. The sooner you tackle this, the easier it will be to solve this problem and the more options you will have.
News
Related News
As jurisdictions nationwide shift from civil fines to criminal prosecution, businesses must move beyond basic payroll processing to avoid the…
New IRS guidance under the OBBBA expands HSA eligibility to include bronze and catastrophic plans, permanent telehealth access, and direct…