Like Katherine Heigl’s character in the 2008 film “27 Dresses,” employers in 2026 may run into an equally-numbered—albeit less quirky—quandary this year: a potential for 27 pay periods. And just as Heigl’s character ultimately found true love, employers can use this helpful guide to find payroll love before Valentines Day.
Why 27 Pay Periods Occur. You may be thinking, how could there be 27 pay periods this year? Each year has 52 weeks, and if employees are paid bi-weekly, then there will be 26 pay periods, right? Not exactly. There is a slight discrepancy between our 365-day years and traditional 14-day pay periods. This is because 14 x 26 = 364, leaving one day (two in leap years) floating in limbo. These add up, and every 11 or 12 years, we hit a point where a 27-pay-period year is possible.
2026 is one of those years. Indeed, employers that pay every other Friday likely started the year with a paycheck on Friday, January 2, 2026. Because Friday, January 1, 2027 is a holiday such that banks will be closed, those employers may decide to issue the final paycheck of 2026 on Thursday, December 31, 2026. This means that the employer will have paid that employee 27 pay checks in 2026, which likely means that salaried employees were overpaid.
The overpayment occurs when employers take an employee salary, divide it by 26, and then provide a 27th payment to the employee based on that figure. Consider this example:
Jane works for Rom-Com Corp. She is exempt and paid an annual salary of $104,000. Rom-Com Corp. typically divides this salary into 26 payments of $4,000, which it provides her every 14 days—every other Friday. This year, if it first paid her on Friday, January 2, 2026, then a payment on Thursday, December 31, 2026 will mean Jane was overpaid by $4,000. This issue is magnified when factoring in 401k matching, overcontributions in violation of IRS rules or benefit plans, payroll taxes, and other expenses associated with employee pay.
So, you may be thinking, why not just forego the 27th payment to Jane? She will have earned her $104,000 by December 18, 2026, right? Not exactly…
Federal and State Law Considerations. Employees who are properly classified as exempt from overtime under the Fair Labor Standards Act must receive a predetermined amount for each pay period that equals at least $684 a week (this number can be higher under certain state laws) and meet certain duties tests. So, withholding that 27th payment is not an option.
Options for Employers That Have Already Paid. Employers who find themselves subject to a 27th pay period as a result of issuing the first paycheck of 2026 on Friday, January 2 should decide whether to: (1) overpay exempt employees in 2026 or (2) reduce remaining paychecks in 2026 to ensure that all paychecks issued in 2026 equal the agreed-upon salary between employer and employee.
Employers who choose the second option will want to: (1) comply with state laws requiring notice to employees regarding a reduction in pay per pay period (usually at least one full pay period in advance, but check your state and local laws); (2) review employment and collective bargaining agreements to ensure that reducing paychecks during 2026 will not violate such agreements and/or bargain with applicable unions; and (3) confirm that reducing pay during 2026 pay periods will not bring the relevant employee(s) below the applicable salary-basis threshold ($684 per week federally, but many times this is higher under applicable state law).
If the employer wishes to reduce the employee’s pay going forward to ensure that all pay periods in a given year add up to the employee’s salary, the adjustment should not be applied retroactively, and it should not reduce the employee’s overall annual salary. The goal is to preserve both the employees’ annual salary and the employer’s budget through prospective change. This can be done using the following formula:
(Annual Salary – Amount Already Paid) ÷ Remaining Number of Pay Periods = New Biweekly Amount
Benefit Considerations. Employers who choose the first option will want to take care they are not violating IRS rules or benefit plans by overcontributing to retirement accounts, health insurance premiums, and/or flexible spending accounts. Assuming no issues arise with this option, it is likely you will have some happy employees.
Employer responsibilities are difficult, weird calendar issues notwithstanding.
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