News & Insights

Many employers pay their salaried employees an annual salary amount that is paid in twenty-six biweekly installments over the course of each year, most often with payday on a Friday. But if the first Friday payday in 2026 is January 2^nd, the last bi-weekly payday in 2026 will be Thursday December 31^st, because Friday January 1, 2027 is a bank holiday and banks are closed. Most employers pay employees a day early if banks are closed on a Friday payday. As a result, there will be twenty-seven paydays in 2026 for some employers, an anomaly that occurs once every eleven years.

To demonstrate the impact, an employee who is paid an annual salary of $60,000 would normally be paid twenty-six installments of $2,307.70 ($2,307.70 x 26 paychecks = $60,000.20).  But that same $60,000 annual salary divided by twenty-seven paydays in 2026 would be $2,222.23 ($2,222.23 x twenty-seven paydays = $60,000.21).  If no adjustment to the 2026 bi-weekly payday amount is made for 2026, the result will be a 4% increase in the 2026 cost of salaried employee payroll in 2026, with proportionate increases in expenses related to payroll like worker’s compensation insurance premiums, employer payroll taxes, and matching 401(k) contributions. If only one or two employees are affected, the impact would be minimal, but if hundreds of employees are effected, the impact to 2026 expense budgeting is significant.  

When planning for a year that has twenty-seven pay periods, there are some additional considerations for employers. For one, employers will need to decide what to pay their salaried employees who are paid bi-weekly. Many employers will continue to pay salaried employees their normal twenty-six week bi-weekly amount; but as noted payroll costs will increase by approximately 4% (not accounting for any wage increases), so employers should budget accordingly. Some employers may consider paying employees 1/27 of their annual salary, rather than 1/26 of their annual salary, on each pay date; however, this option could cause confusion and discontent among employees. Additionally, employers should consider exactly what their employment documents say regarding salary amounts. If the payroll documents only list a bi-weekly amount, not an annual amount, or if it is not clear, likely no adjustment should be made. If you have questions about this issue or about other business matters as you plan for the new year, contact us at 215-896-3846 or email help@rckelly.com.