27 vs 26 Biweekly Payperiods
DB
136 Posts
I work for city govt. We do biweekly payroll with the first check distributed in 2004 on Jan 2. That means we will have 27 payrolls instead of the usual 26. There will be 26 payrolls in both 2003 and 2005. What should I worry about with this extra payroll? Am I getting worked up over nothing?
Comments
Is your payday delayed? The first payday is probably entirely earned in 2003. Do you pay by the hour? If so, you are only paying for hours worked or otherwise earned per your policy - so there is no extra pay going on. Same with exempts, you pay by the week and no one got a free week. It is just the math of 26 pay periods vs a 365 or 366 day year.
There is no free lunch.
Second, what about deductions that are based on 26 payperiods. For example, employees pay $1200 per year for health insurance; we divide by 26 for $46.16 per pay. Should that be adjusted?
As a side note, our company only deducts from the first 2 pays of each month (total of 24 pays per year). Employees like getting the "extra" money in months with 3 pays.
Speak to your finance and accounting department about how they budget - whether they use a cash or accrual basis. If your Company's fiscal year is January 1 to December 31, then most, if not all of the wages in your January 2 paycheck were budgeted in the year ended 12/31/03, and should be accrued to that period. The only additional budgetary impact should be the extra day in February.
If you look into 2005, you will see that you only have 25 pay periods (if I counted correctly), so even on a cash basis, it levels out over the 2 year period.
Since the IRS looks at when the money is paid, the $52,000 employee will earn $54,000 in 2004.