27 pay periods

NaeNae55

We get paid every other Thursday making 26 pay periods per year. I just realized we will get paid 27 times in 2008 (we will be paid the day before the regular payday of Thurs 01/01/09 since it is a holiday). Does that mean I need to divide our Section 125 withholdings by 27 instead of 26?

Arrgghh! xx(

Nae

joannie

We don't, we just date the checks the day of the holiday. Can't say for sure this is the correct way to handle though, since I'm not the one processing payroll and haven't researched it. One of those things I don't want to know about since I'm not responsible for it, if you know what I mean.

SMace

This will not answer your question, but we are only going to pay 26 periods next year, not 27. Yipee!

Dutch2

If anyone is putting in the maximum amount for their 125 plan for the year an additional payday would put them over the max allowed. Same for any other "benefit" with max limits. Such as 401(k) etc.. This could be fun to try and straighten out.
As mentioned in an earlier post, if you were to date the check 1-1-09 would this then give you 27 pay periods in 09? Would be a good idea to go ahead and check out 09 pay periods as well.
Good luck...

Wildsporty

When the 27 pay period happens I simply have one payperiod without section 125 deductions. Typically the 27th pay period. If I do this than my system will not take out deductions because the goal has been reached. Also if you have it set up that way the goal will be reached for anyone on 401k withholdings so they do not overwithold. If you do not have goals set up you can just turn off benefits on the 27th payroll.

The employees like haveing the extra money once in a while and since our policy tells them we take benefits out 26 times a year it is all taken care of that way.

The only thing you do have to worry about is does the company pay the extra pay period for the salaried employees or are you going to divide their salary by 27 pay periods? Our company just pays the extra pay period.

Shirley

NaeNae55

Thank you for all your responses.

I checked and if we paid on 1/01/09 we would have 27 pay checks in 2009. We will go ahead and handle as usual, but do the FSA for 26 pay days. There are a few other deductions that we will handle the same way.

We only have one employee who maxes on their 401k contribution. Since most do it on a % we will go ahead and do those deductions and the credit union deductions on the 27th pay day.

BTW, we will pay our exempt people the same as usual.

Thanks again!

Nae

Dutch2

I sent the question to our TPA that handles our 125 plan. They responded we could do it two ways: either divide the ee's amounts by 27 or as some have suggested you skip a pay period. Either way will work for them. However they prefer dividing by 27 pay periods.
Have fun...

stilldazed

You don't have to, but verify how your SPD defines your responsibilities. You can simply declare the extra pay check as a freebie and don't take deductions. You may get some unbargained for 'good' publicity out of that, especially if the timing works out such that the freebie check is near a time when workers might be spending extra money (back to school, Christmas, early summer for vacation, etc.).

FunHRBanker

[font size="1" color="#FF0000"]LAST EDITED ON 10-22-07 AT 12:12PM (CST)[/font][br][br]We too will have 27 pay periods in 2008 (woo-hoo). We're dividing everything by 27 (deductions, salaries, etc.). 401k is done by percentage only so no issues there and once a person has maxed, the system automatically stops.

Oops, I meant that we will have 27 pay periods in 2008, not 2009!

NaeNae55

Salaries? So if you have someone who is paid at a rate of $40,000 per year they will gross $1,481.48 per 2 week pay period in 2009 instead of $1,538.46 as in 2008? Did I misunderstand or is this your plan?

If you plan to pay the lower amount will that put you in a positon of possibly having an employment contract with your exempts?

Nae

FunHRBanker

[font size="1" color="#FF0000"]LAST EDITED ON 10-22-07 AT 12:13PM (CST)[/font][br][br]Yes, we divide the salaries by 27. We are an at will state and have no contracted employees. The employee is still paid the same annual amount (obviously). Everyone grumbles when this happens, but that's the way the cookie crumbles.

joannie

We are an "at will" state also, but our employment law attorney advised us quoting salaries as an annual wage rather than the pay period wage implied a contract.

NaeNae55

We are an at will state too, but I would be afraid to do things the way you do. We are very careful in our offer letters to state we are paying at an annual rate of $xxx, rather than we are paying you $xxx annually just to make sure we avoid any possibility of turning our offer letter into a contract. I would think a court could interpret your method as giving an employee a contract for the year. I guess that part is all semantics, but I feel sure I read an expert's advice on this about 2-3 years ago and they strongly advised to pay by pay period, and not annually. Of course, that doesn't make them actually right. We must have a court case to back them up (and I don't remember if there was one or not).

If I worked at your company I would be very unhappy indeed. I will work just as hard and for the same amount of hours in the first two weeks of 2009 as I will the last two weeks of 2008, but my pay is less. Further, it will continue to be less for the entire year. Soap!

Nae

plynnl

We are also an "at will state" but I was told for legal reasons all our paperwork for new employees that mentions salary is always broken out into pay period amounts rather than yearly amounts. This, like Nae mentioned, is not to have an employee assume that because they are making a yearly salary that they are now to be employed for the full year.

We also give the new employees what the cost is per pay period for their medical/dental, vacation, PTO, etc. benefits.

They never get any paperwork with a yearly salary amount. Hopefully they know how to multiply.

FunHRBanker

We too state annual salaries as a per pay period amount for the same reasons. Pay periods fall when they fall. Everyone is still being paid bi-weekly and the same annual amount they would have had in 26 payrolls. Their section 125 deductions are also less.