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  1. #1
    Join Date
    Apr 2017
    Posts
    12

    Default 27 Pay Periods

    My question involves labor and employment law for the state of: California

    My question regards pay periods. Our first payroll in 2020 falls on January 3rd, for the period through December 29th 2019. We pay biweekly. The last pay period in 2020 should fall on January 1, 2021, but because it's New Year's, it gets pushed back to December 31. This results in 27 pay periods in 2020. The January 17th 2020 payroll will incorporate new pay rates for everyone (all salaried). If we divide the salaries by 26 and pay 26 times through December 31st, everyone will effectively be overpaid for the year, and the company's payroll expense will be inflated.

    So how does one handle something like this? My thought was to divide the new rates by 27, 26 of which will be paid in 2020 (plus the Jan 3rd 2020 payroll), with the 27th payment made on January 14th, 2021, after which we would use new 2021 pay rates for the rest of the year.

    Maybe I'm over-complicating this. It seems that if our January 3rd, 2020 rate was the same as the rest of the year, the simple fix would be to divide by 27, but that's not the case. Can someone help me out on this one?

    Thanks very much.

  2. #2
    Join Date
    Mar 2013
    Posts
    17,514

    Default Re: 27 Pay Periods

    It's a math problem, not a legal problem.

    Your CFO or company payroll accountant is the one to figure it out.

  3. #3
    Join Date
    Feb 2008
    Posts
    1,153

    Default Re: 27 Pay Periods

    agree that this discussion needs to take place with finance...because on biweekly payrolls, 52/2= 26 but not all calendar years have those 26 fall within the 12 months - there is always over/underlap since there is that extra 1.25 days per year...may be more and actually could be less. This is one place where paying salaried biweekly shows as a negative.

    A few years ago when we encountered this, we chose to payout the extra payroll period.

  4. #4
    Join Date
    Sep 2010
    Posts
    19,431

    Default Re: 27 Pay Periods

    As far as the (at least federal) employment law goes, as long as you're paid for the time (either for the year if exempt) or the hours (non-exempt), it matters not when the checks are cut.
    The IRS will consider for tax purposes the money based on when the check is cut (or money is direct deposited), so yes the tax liability might differ from year to year due to how things fall.

    Here's a document explaining things: https://www.thebalancesmb.com/end-of...-taxes-3974570

  5. #5
    Join Date
    Apr 2017
    Posts
    12

    Default Re: 27 Pay Periods

    I understand that this is not a legal issue, and is entirely a math issue. If we were willing to just pay it out, there would be no issue, but management is not up for that.

    I'm the CFO/payroll accountant guy, and I can do maths, but I'm wondering more about what would be considered most appropriate, or if anyone else has experienced a similar situation (probably not super-likely).

  6. #6
    Join Date
    Oct 2016
    Posts
    3,587

    Default Re: 27 Pay Periods

    You know, there is no law that says you can't pay on 1/1/21 or that you have to roll it back into 2020. Sure Direct Deposits can't hit on 1/1 but that doesn't mean the checks can't be dated in 2021.

  7. #7
    Join Date
    Oct 2006
    Posts
    15,939

    Default Re: 27 Pay Periods

    Quote Quoting joeblow
    View Post
    My question involves labor and employment law for the state of: California

    My question regards pay periods. Our first payroll in 2020 falls on January 3rd, for the period through December 29th 2019. We pay biweekly. The last pay period in 2020 should fall on January 1, 2021, but because it's New Year's, it gets pushed back to December 31. This results in 27 pay periods in 2020. The January 17th 2020 payroll will incorporate new pay rates for everyone (all salaried). If we divide the salaries by 26 and pay 26 times through December 31st, everyone will effectively be overpaid for the year, and the company's payroll expense will be inflated.

    So how does one handle something like this? My thought was to divide the new rates by 27, 26 of which will be paid in 2020 (plus the Jan 3rd 2020 payroll), with the 27th payment made on January 14th, 2021, after which we would use new 2021 pay rates for the rest of the year.

    Maybe I'm over-complicating this. It seems that if our January 3rd, 2020 rate was the same as the rest of the year, the simple fix would be to divide by 27, but that's not the case. Can someone help me out on this one?

    Thanks very much.
    The January 20/20 payroll still should be paid at 2019 rates and the first official payroll of 2020, which I assume will be on the 18th, paid at the new rates, as well as the rest of the year. Do the same thing ever year (paying for when the work was completed, not for the day that payroll falls on, and you will always be ok.

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