By: Shon K. Worner, Esquire and Joshua C. Hausman, Esq.
In 2026, employers who pay their employees biweekly may be met with 27 pay periods instead of the usual 26. If under an employer’s biweekly pay schedule, the first payment in 2026 will fall on January 2, the 26th such biweekly pay day will fall on December 18, 2026, and the 27th on January 1, 2027. Generally, employees are paid on the day preceding a holiday which, in this case, would mean December 31, 2026. As a result, in 2026, a biweekly pay schedule beginning on January 2 will result in there being 27 pay periods, and not the usual 26.
Employees paid on an hourly basis will still be paid based on hours worked over the preceding pay period. For employees paid on a salary basis, employers must determine how to handle this extra pay period. In many cases, the best approach is to divide the employee’s annual salary by 27 instead of the usual 26. This approach ensures that the employee will not earn more or less than their stated annual salary over the course of the year. However, beginning in January, these employees will immediately see smaller paychecks and will understandably have questions about the perceived reduction. Employers selecting this option should communicate with employees ahead of the first pay period of the year so that expectations can be appropriately managed.
However, there are several pitfalls that must be avoided in adjusting pay for salaried employees to account for the 27th pay period. First, employers should consult any applicable collective bargaining agreement to determine whether there are any limitations on an employer’s ability to make these adjustments. For example, it may not be possible (or at least, would likely result in an arbitration award against the employer) to make such an adjustment in the case of Agreements that specify the salaried amount to be received by the employee on a biweekly basis. Also, be mindful of collective bargaining agreement provisions that annualize a non-exempt (hourly) employee’s base pay, its manner of calculation, or which contain past practice language which could be used to argue that the employer should account for the extra pay period in the same manner it may have done so previously, since this issue arises roughly every 10 years. In other cases, there may be unexpected overtime complications arising from a salary adjustment to account for the 27th payroll period. For example, it is possible that the downward adjustment could result in the employee no longer meeting the salary threshold necessary to maintain an exemption from the FLSA’s overtime requirements (currently $684 per week).
Further, in all cases—salaried and hourly employees alike—employers must review payroll deductions for things like employment benefits, pension contributions, 401(k) contributions, and payroll taxes to ensure that the extra pay period does not result in either over or under-withholding for 2026. Where adjustments are necessary, these should be put into place beginning in January, communicated ahead of time, and adjusted again in 2027 once the extra payroll year is behind us. It should be noted that even if an employer decides to maintain the same amount per pay for salaried employees in 2026, consequently thereby accepting an overpayment in 2026, that deduction should be adjusted so that there is not an over-withholding on the year.
Takeaways:
- Depending on an employer’s bi-weekly pay schedule, there may be an extra 27th pay period in 2026.
- Hourly employees will be paid as normal, but for salaried employees, employers need to consider how to account for the extra pay period.
- Failing to make any adjustment (maintaining existing paycheck amounts) will result in an overpayment in 2026.
- Employers desiring to account for the extra pay period to ensure that there is no overpayment should communicate with employees ahead of time and review applicable collective bargaining agreements for any limitations. Also, possible impacts on overtime exemptions should be considered.
- For both hourly and salaried employees, employers should ensure that they are not over or under-withholding on payroll deductions in 2026.
Bottom Line:
Be sure to consult your labor and employment attorneys regarding how to account for this extra payroll period in 2026.
