Does One More Pay Period in a Year Make Any Difference?

When is 52 not the correct answer? That’s easy when you look at it from a payroll perspective …

Depending on the payroll schedule and the day of the week payroll is issued, you might actually have 53 payrolls in a year or 27 if you are on a bi-weekly payroll schedule. Because of that, there may need to be adjustments to the taxes being withheld. In addition, adjustment might be necessary to pretax deductions.

You see, for the usual year, pay period wages are usually calculated on 26/52 pay periods/weeks. In those unusual years, pay period wages have to be adjusted to be calculated on a 27/53 basis. Likewise, the annual tax is calculated on a 27/53 basis as well. Failure to make this adjustment could result in under-withholding of federal, state and local income tax – and that can have an adverse consequences.

While this all seems complicated and seemingly not really an issue, it can affect your budget and bottom line. Depending on how the salary of an exempt employee is divided, the employee could actually receive more than the agreed upon annual salary in a year with an extra pay period.

However you decide to handle the issue, it’s best to learn all the options that are available and then make a decision and stick with it. Your accountant will be able to advise you regarding your options and The Payroll Department can make it happen with the payroll pay period in and pay period out – no matter whether there are 26 or 27; or 52 or 53.

Don’t forget that whatever process you decide to use, the payroll taxes have to be adjusted to match the wages. So, if you make a decision with your accountant about payroll, inform your payroll provider. You don’t want any surprises because of a miscommunication or lack of communication.

The Payroll Department was named that way because we want to be your partner, just like walking down the hall and talking to the payroll department in your business, we are just a call away – and part of your team. We are here to help you manage this complicated part of your business and take care of the details to make it run smoothly. Contact us today!

-Elaine of The Payroll Department Blog Team