- 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.
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.