Employers That Pay Biweekly May Have 27 Paydays in 2026. Are You Ready?

Employers that pay their employees on a biweekly pay cycle often determine the amount of an employee’s biweekly salary by dividing their designated annual salary by 26, reasoning that there will be 26 pay cycles in a 52-week year. Makes sense, right? Not so fast! Once every 11 or 12 years, employers that pay biweekly will be faced with an unexpected payroll budget surprise – a 27th payday. For many employers, 2026 will be that year. How should an employer manage this unexpected payroll obligation?

The Story of Acme, Inc. and Jane Doe

To understand this issue fully, let us consider the example of Acme, Inc., which pays its employees on a biweekly basis. Acme’s designated workweek is Sunday through Saturday, and payday is the Friday following the end of each biweekly pay period. Acme pays Jane Doe an annual salary of $52,000. Acme divided Jane’s annual salary by 26 to determine her biweekly salary of $2,000. Jane’s 26th and final wage payment in 2025 will take place on December 19, bringing her total compensation paid in 2025 to the promised $52,000. So far, so good.

Acme’s payroll department is now planning for 2026. It marks the 26 paydays on the calendar, starting with January 2 and ending on December 18. Then, it realizes that because the next payday after December 18 would be January 1, 2027 (a holiday), it will be making that wage payment one day early, on December 31, 2026. As a result, there will be 27 paydays in 2026. If Acme continues to pay Jane a biweekly salary of $2,000, Jane will be paid $54,000 in 2026 – $2,000 more than expected. 

Unfortunately, Acme didn’t budget for a 27th payday in 2026, meaning that its payroll expense for 2026 is already nearly 4% over budget – and 2026 hasn’t even started yet! What should Acme do? Divide Jane’s 2026 annual salary by 27 instead of 26? Skip the December 31 payday altogether based on the logic that Jane will be fully compensated for the year by December 18? Accept their budgetary fate while cursing the inventor of the Julian calendar for creating this anomaly?¹

Before considering Acme’s options, it is important to understand how Acme got into this situation in the first place.

One Calendar Year Has More than 26 Biweekly Pay Periods

Quite simply, Acme overlooked that one calendar year has more than 26 biweekly pay periods. By dividing Jane’s designated annual salary by 26, Acme has been slightly overpaying Jane all along. That’s because 26 biweekly pay periods only cover 364 calendar days, and a year has 365 calendar days (366 in leap years). 

If Jane’s annual salary is meant to be exactly $52,000, then her biweekly salary should have been about $1,994.52 (i.e., $52,000 x 14/365) in a non-leap year (or $1,989.07 in a leap-year), slightly less than $2,000.² While that may seem like a small difference (only $5.48 per pay, or $10.93 in a leap year), it adds up. Across 26 pay periods in a year, that’s $142.48 ($284.18 in a leap year). Over 11 years (including 3 leap years), that’s almost $2,000 (the equivalent of an entire biweekly paycheck) in overpayments relative to the intended salary.

This anomaly usually goes unnoticed (at least, until the year of the dreaded 27th payday). Lurking beneath the surface, the fact that 26 biweekly pay cycles cover only 364 days means one day every year (two days in leap years) is not covered by those 26 paychecks. Those gaps accumulate from one year to the next. Every 11 to 12 years, the accumulated gap will reach 14 days (the length of a biweekly pay period), and the employer will need an additional biweekly paycheck to cover them.³ Had the employer multiplied the employee’s designated annual salary by 14/365 (or 14/366 in leap years), instead of dividing it by 26, the accumulated savings would have covered that additional paycheck. 

While it’s too late for employers to do anything about slight overpayments already made across the past decade, it’s not too late to manage this issue going forward. Now that Acme is aware of the issue, what can it do to prepare for 2026 and beyond?

Clarify Agreement to Pay Biweekly Salary

Employers that pay biweekly should make clear to employees that – regardless of their designated annual salary – the employer’s commitment is to pay the specific biweekly salary amount. Even if Acme historically calculated Jane’s biweekly salary by dividing her designated annual salary by 26, it would be lawful for Acme to tell Jane that going forward, her biweekly salary will be calculated based on the “multiply by 14/365” method, reducing it to $1,994.52 (i.e., $52,000 x 14/365). Indeed, Acme could even tell Jane that in 2026, her biweekly salary will be reduced to $1,925.93 (i.e., $52,000 ÷ 27), reasoning that there will be 27 wage payments in 2026. While the “divide by 27” approach is not properly aligned with the calendar year (of course, neither was the “divide by 26” approach), the amount of an employee’s biweekly salary is ultimately a matter of agreement between employer and employee.⁴ To avoid confusion, employers should make clear that the compensation agreement with their employees is for the biweekly payment of a specified biweekly salary amount (and not that the sum of their biweekly salary payments in an given year will equal their designated annual salary amount).

Reduction to Biweekly Salary

If an employer prospectively changes its approach to converting an employee’s designated annual salary to a biweekly equivalent (e.g., instead of “divide by 26” as in prior years, changing to “multiply by 14/365” or “divide by 27”) and the new approach would yield a lower biweekly salary than the employee currently receives, then the employer must comply with state law notice requirements relating to reductions in pay. State law varies, but providing notice of the change at least one full pay period in advance is usually sufficient for pay reductions.⁵ Employers must also take care to comply with any contractual salary guarantees that may exist, such as in employment agreements or offer letters.

Even if it complies with state law notice requirements and contractual obligations, Acme may still face morale issues when employees experience a reduction to their biweekly salary during the transition from a “divide by 26” approach to a “multiply by 14/365” or “divide by 27” approach. To mitigate this impact, Acme might want to consider timing the change in approach so that it coincides with an annual salary increase. For example, if Jane will be getting a raise to $54,000 per year in early 2026, Acme could implement its change from a “divide by 26” approach to a “multiply by 14/365” approach then, so Jane’s biweekly salary will go up (from $2,000 to $2,071.23), not down.

Effective Date of Salary Adjustment

Employers should exercise caution to ensure that biweekly salary payments accurately compensate employees at the biweekly salary rate in effect during the pay period covered by the salary payment. Doing this is complicated when an employee experiences a salary adjustment within a pay period.

Let us assume that Jane’s annual salary was $50,000 in 2024. Acme announced that Jane would receive a raise to $52,000 effective January 1, 2025. How should Acme have calculated Jane’s biweekly salary at the time of the transition? 

First, Acme should have properly calculated Jane’s biweekly salary for each year. Because 2024 was a leap year, the biweekly equivalent of a $50,000 annual salary that year was $1,912.57 (i.e., $50,000 x 14/366). After her raise, the biweekly equivalent of Jane’s $52,000 annual salary in 2025 increased to $1,994.52 (i.e., $52,000 x 14/365). 

If Acme had used these biweekly amounts, it would still have needed to ensure that each wage payment covered the correct period. For example:

• Jane’s January 3, 2025, wage payment covered work performed from December 15 through December 28, 2024. Thus, the January 3 payment should have been made at her 2024 salary rate of $1,912.57, even though it was paid in 2025.
• Jane’s January 17, 2025, wage payment covered the last three days of 2024 and the first 11 days of 2025. Thus, it should have been apportioned accordingly, with 3/14ths of her wage payment paid at her 2024 biweekly salary and 11/14ths paid at her 2025 biweekly salary: ($1,912.57 x 3/14) + ($1,994.52 x 11/14) = $1,976.96.
• Jane’s January 31, 2025, wage payment would be the first check issued in 2025 that exclusively compensated her for work performed in 2025. Thus, it should have been issued for the full $1,994.52 amount.

To avoid this complication during periods of salary transition, employers may choose to make salary adjustments effective on the first day of a pay period instead of on the first day of a calendar year or month. To avoid confusion and comply with state notice laws, employers should clearly communicate to their employees the effective date of salary adjustments, making clear which pay period will be worked at the new salary and which pay date will reflect that adjustment.

Salary Threshold for Exempt Status

Employers should also ensure that their approach to determining an employee’s biweekly salary does not result in salaried exempt employees dropping below the minimum weekly salary threshold needed to qualify for certain exemptions. Under federal law, the salary threshold for certain exempt executive, administrative, and professional employees is $684 per week ($1,368 biweekly); it is higher in Alaska, California, Colorado, Maine, New York, and Washington. An employer that changes from a “divide by 26” approach to a “multiply by 14/365” or “divide by 27” approach should make sure that the new approach does not cause weekly salary rates to fall below the applicable threshold.

Aligning Payroll with Calendar Years

Some employers prefer that: (a) total wages paid in a calendar year exactly equal the target annual salary for that year; and (b) the wages paid in a year correspond only to work performed that year. For such employers, one option is to end each year with an off-cycle check paid on December 31 to cover any balance. For example, Acme could issue Jane a wage payment on December 31, 2025, covering work performed from December 14 through December 31. The otherwise scheduled January 2, 2026, wage payment would then be skipped, and the January 16, 2026, wage payment would cover January 1 through January 10, 2026. To be sure, this approach has its own complications. An employer considering it may want instead to convert to a semi-monthly wage payment cycle in which the annual salary is divided by 24 with wage payments occurring on the 15th and last days of each month.

Payroll Deductions

When a calendar year includes 27 paydays, the employer must decide how to handle payroll deductions for health benefits, flexible spending accounts, and other benefits for which the employee makes contributions via wage deductions. Some employers on a biweekly cycle divide the annual amounts by 24 (not 26) and take deductions only from the first two wage payments each month (taking no deduction from the third monthly paycheck that usually arises two times a year). Such employers could continue this approach in 2026, when there will be three months with a third paycheck from which no deduction is taken. Other employers may choose to take deductions from every check (which in 2026 could mean dividing annual amounts by 27 instead of 26) or from the first 26 checks (which would mean taking no deduction from the 27th wage payment in 2026).⁶ To avoid confusion, employers should communicate the schedule and rationale for these deductions to their employees.

Accounting Considerations

If an employer uses cash basis accounting, U.S. Generally Accepted Accounting Principles (GAAP) will require that the employer recognize the higher payroll expense in any accounting year with 27 paydays, due to the expense associated with more than the usual number of payrolls in that year. If an employer uses accrual basis accounting, however, GAAP may permit the employer to perform a pro-rata accrual of payroll expenses at the end of each year to allocate them based on when the work was performed. Employers that will experience a 27th payroll event in 2026 should consult with their accounting professionals to ensure they are prepared.