Preparing for an Extra Biweekly Payroll Period in 2026: What Employers Need to Know
If your organization runs on a biweekly payroll schedule, 2026 is not just another year—it introduces a rare but important shift that can impact payroll operations, compliance, and employee expectations.
Due to calendar alignment and the New Year’s Day holiday falling on Friday, Jan. 1, 2027, many employers will move that payroll into 2026. This creates a 27-pay-period year, something that only happens roughly once every 11–12 years.
While this might seem like a minor scheduling detail, it can have significant ripple effects across compensation, benefits, tax withholdings, and compliance.
Let’s break down what this means—and how to prepare.
Why 2026 Is Different
Most years include 26 biweekly pay periods. But in 2026:
- Payroll cycles may shift due to holiday timing
- A 27th paycheck could fall on Dec. 31, 2026
- This creates challenges around salary calculations, budgeting, and benefits deductions
Without planning, employers risk:
- Overpaying employees
- Falling out of compliance (especially with exempt salary thresholds)
- Mismanaging benefit contributions
Key Payroll Risks to Watch
1. Salary Compliance (EAP Exemptions)
Salaried employees must meet minimum thresholds to remain exempt under FLSA rules. Dividing salaries across 27 pay periods instead of 26 may unintentionally reduce weekly pay below required levels.
2. Budget Impact
Adding a 27th paycheck can increase payroll expenses by up to 3.85%, before factoring in benefits and taxes.
3. Benefits & Deductions
Payroll-driven deductions—health insurance, HSAs, FSAs, retirement contributions—can be disrupted if not recalibrated properly.
4. Tax Withholding Accuracy
Payroll systems must be configured correctly to prevent under- or over-withholding across the extra cycle.
Choosing the Right Payroll Strategy
Option 1: Pro-rate Salaries Across 27 Periods
- Lower paycheck amounts
- No increase in total annual pay
- Simpler from a budgeting perspective
Option 2: Maintain 26 Pay Cycles + Add One Extra
- Employees receive an additional paycheck
- Increases total payroll cost
- Easier for employee relations but requires budget adjustments
Employer Checklist Review
☐ EAP Exemption Compliance
Salaried workers are paid a predetermined amount for each pay period. Under the federal Fair Labor Standards Act (FLSA), employees who are properly classified as exempt under the executive, administrative and professional (EAP) exemptions are not entitled to overtime pay. Specifically, to qualify for exemption, employees generally must:
- Be paid on a salary basis
- Be paid a salary that meets the specified minimum amount per week (currently $684)
- Meet certain duties tests
☐ Notice Requirements
Before making adjustments to payroll, employers should check federal, state and local requirements for notifying employees before adjusting pay frequency or amounts. Notably, some states have requirements on how notice for changes to payments should be handled.
☐ Tax Withholdings
Whether an employer has 26 or 27 payroll cycles, correct tax withholding calculations must be maintained across all pay periods. While IRS withholding tables typically accommodate this, employers are responsible for ensuring their payroll software is updated and properly configured for the extra period to prevent under-withholding.
☐ Overpayment
Adding an extra payroll cycle is a common approach many employers take during a 27-pay-period year. However, doing so carries the risk of unintentionally overpaying salaried employees. Notably, issuing an additional paycheck increases annual payroll expenses—potentially by up to 3.85%—before factoring in the added cost of benefits contributions and related liabilities.
☐ Benefits Contributions
Employers make and allow for benefits contributions in cadence with their payroll. An extra payroll cycle can impact mandatory statutory deductions (taxes), health insurance, contributions to accounts like health savings accounts (HSAs) and flexible spending accounts (FSAs), voluntary benefits (e.g., dental and vision), retirement accounts (such as a 401(k)) and more. Generally, even employers planning for 27 payroll cycles in 2026 complete benefits deductions for the first 26 paychecks.
In 2026, an extra biweekly payroll period presents both operational and compliance challenges for employers. While many payroll vendors and platforms help your organization stay organized, it may be better to audit your payroll than make mistakes that impact employees or violate compliance requirements. Employers should consider seeking local legal counsel to ensure their payroll practices are in compliance with all applicable laws and regulations. Contact us today for more resources.
