News

Many employers issue paychecks biweekly, which results in 26 pay periods per year. This year, 2026 employers will encounter an adjustment where a biweekly pay schedule may result in 27 pay periods.  

Employers that started the year with a paycheck on Friday, Jan. 2, may intend to pay the final paycheck of 2026 on Thursday, Dec. 31, given that Friday, Jan. 1, 2027, is a holiday. If an employer follows this schedule, then they will have 27 pay periods this year instead of the usual 26:

This issue typically goes unnoticed until employers are suddenly confronted with that 27th paycheck. The reason for the extra paycheck is straightforward: 26 biweekly pay periods account for only 364 days, leaving one day uncovered each year (or two in leap years). Those missing days quietly roll forward from year to year. After about 11 or 12 years, the accumulated gap equals 14 days, or one full biweekly pay period, forcing employers to issue an extra paycheck.

The risk of issuing the extra paycheck is in overpaying employees. One extra paycheck might not seem like a big deal in isolation, but the cost adds up quickly when impacting multiple employees.

For example, if an employer issues 27 paychecks to an employee with an annual salary of $80,000 who is typically paid in 26 equal paychecks of approximately $3,076 each, that employee’s total compensation for the year increases to $83,076, an unintentional raise of more than $3,000. Multiply that overpayment across several employees at the same, or higher, salary level, plus retirement plan matching contributions, employer payroll taxes and other benefit-related costs: Suddenly, that one “extra” paycheck becomes a much bigger – and much more expensive – problem. But simply withholding the 27th paycheck could lead to unforeseen and unintended legal consequences.

Before deciding how to proceed, employers should carefully weigh the following:

First, employers should ensure that they do not violate exempt employee status requirements under state and federal law by withholding the 27th paycheck. If an employer classifies an employee as exempt, then the employer must ensure that their weekly pay does not drop below the minimum salary threshold required under the Fair Labor Standards Act (FLSA). If an exempt employee falls below the minimum salary threshold, and the employer fails to treat them properly as non-exempt, then the employer could be on the hook for overtime pay obligations. If an FLSA violation occurs, the cost of overpaying the employee could be nominal compared to a potential judgment or settlement of an alleged FLSA claim.

For hourly (non-exempt) employees, payroll is based directly on the employee’s total hours worked. So, if the 27th pay date coincides with work periods, those employees will be compensated accordingly. Their overall annual compensation also will automatically increase due to the additional paycheck.

Second, employers should consider IRS rules with respect to overcontributing or under contributing to benefit accounts. Health insurance premiums, health insurance limits for flexible spending accounts, health saving accounts and 401(k) plans are generally set by calendar year, so employers should check the status of all such benefit contributions in deciding whether to issue a 27th paycheck.

Third, employers should consider applicable notice requirements before withholding any paychecks to ensure compliance with federal, state and local laws requiring advance notice to employees before adjusting pay frequency or amounts.

Once the above factors have been considered, employers should:

1. Decide whether to adjust employees’ biweekly pay checks. Be aware: Reducing one or more pay checks may implicate federal, state and/or local wage and hour and wage payment laws, as well as certain employment contracts or offer letters.
2. Determine if and to what extent their benefit plans will be affected to ensure compliance with payroll deductions for purposes of employee benefits (HSA, FSA) and retirement plan contributions before making any reductions or changes to payroll.  
3. Communicate with employees. This may be the most important step of all. If an employee suddenly receives a paycheck less than their normal biweekly pay after adjusting for 27 pay periods, they will likely have concerns. Apart from any legally required notice to employees of certain changes in pay, employers should clearly communicate with employees about this rare situation to avoid confusion and potential wage claims.

Miles & Stockbridge’s labor and employment lawyers are available to help employers determine their best plan and manage any employee questions or problems.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.