In 2026, employers using a biweekly payroll schedule may encounter an unusual issue: a 27th pay period. Depending on when your payroll cycle begins, the calendar alignment in 2026 could result in an extra payday before the year ends. Because New Year’s Day falls on a Friday in 2027, some organizations will issue their final 2026 paycheck on December 31. While a 27-pay-period year only happens about once every 11 to 12 years, it can create important payroll, compliance and budgeting concerns for employers.
One of the most significant concerns involves salaried, exempt employees. Employers that simply divide annual salaries across 27 pay periods instead of the standard 26 may unintentionally reduce employees’ individual paycheck amounts. In some cases, this could create issues with minimum salary thresholds required to maintain exempt status under the Fair Labor Standards Act (FLSA) and certain state wage and hour laws.
Organizations should also review payroll administration and compliance considerations well in advance. Employers may need to address employee notification requirements for pay changes, ensure accurate payroll tax withholdings and avoid overpayment issues. If employers keep paychecks at the same amount and add a 27th payroll, total payroll expenses could increase by approximately 3.85 percent — a potentially significant impact for companies with large salaried workforces.
Employee benefits and payroll deductions also deserve careful attention during a 27-pay-period year. Health insurance premiums, HSA and FSA contributions, retirement plan deductions and other benefit-related withholdings are typically structured around 26 pay periods. Without proper planning, employees could exceed annual contribution limits or miss required deductions.
To address a 27th pay period in 2026, employers generally choose between two options: prorating annual salaries over 27 paychecks, which slightly lowers each paycheck amount, or maintaining current paycheck amounts and issuing an additional paycheck, which increases overall compensation costs. Regardless of the strategy selected, employers should begin planning now by reviewing payroll calendars, coordinating with payroll providers, evaluating budgets and communicating clearly with employees to avoid payroll errors and maintain compliance.
This article was originally written by Tammy Toman for The MBA‘s Business Magazine. The original article can be read here.