27 pay period year

No adjustment should be made.  If you pay every other week, then you don't truly offer an Annual Salary, but one that approximates a year. Really, you offer 1/26th of the annual salary every two weeks.  Sometimes there are 27 payroll dates in a year, and sometimes 26.  There are always 26 periods, though. Similarly, there are sometimes 2 payroll dates per month and sometimes 3.

You can take your annual salary and divide it by 27 payperiods and use that amount as the bi-weekly pay.

You should not divide your annual salary by 27 just because you have 27 pay dates in the year.  That would be cheating your employees and open you to litigation. It would be like reducing your employee's hourly wages by ~3.5% because there are 27 pay dates.  Though they will 'get paid just as much' for the year you are paying them for 54 weeks of work instead of 52.

There are not 27 pay periods in the year, but for some employers there are 27 pay dates.  It depends on what day of the week you issue paychecks.

There are always about 52.14 weeks in a year, or 26.07 bi-weekly pay periods. Every so often, this means that there will be actually one more pay date than normal.  But, you're still paying the employees by the period, not the pay date.  And, for salaried employees, each period's amount should be the same.

Though you might quote an Annual salary to your employees, if you don't pay on a period divisible by a year, then you end up paying the salary based on that period instead of annually.

The only accepted way to make your yearly salary payouts always the same by year is to pay the salary on a period divisible by a year (once a month, for example, or 2x per month.)

Go ahead and start the litigation if you like Tim, but I believe Mimbreno gave the correct answer.  With your logic the employee would be overpaid for the year.  If you assume an employee was quoted an annual salary of $52,000 per year and paid every two weeks, he would have a bi-weekly pay of $2,000.  If the employee didn't receive any pay raises for a three year period and years 1 and 3 were normal 26 pay periods and year 2 was the unusual 27 pay periods, his W-2s would report:

year 1 - $52,000

year 2 - $54,000

year 3 - $52,000

If the salary was quoted as $52,000 per year, where was he cheated?

I'm not proposing litigation personally. I'm saying your employees may be incited to litigation for a reduction in wages.

They would be cheated because you are proposing that for 27 payroll dates you will pay less than $2000 per every two week pay period. Those 27 pay dates cover work for more than the year, at 54 weeks instead of 52.

When you quote an annual salary, the implication is that the employee will be paid that amount for 52 weeks of work.  Whether you get around to paying them for that work in the year is beside the point. If you pay in arrears, or even on the last date of the pay period, you will often pay for work in one year in another year.

Tim, I'm not a labor attorney, but I assume you aren't either.  I think you are blurring the lines between salaried employees and hourly ones.  If you have a contractual agreement that says you will pay an employee an annual salary of $52,000 and within that calendar year, he is paid $52,000, where has he been cheated?  Whether the $52,000 is spread between 26 pay periods or 27 pay periods, the end result is the employee goes home at the end of the year with a W-2 that shows earnings of $52,000.  A large part of our firm's revenues are derived from local government audits.  Those entities all pay based on biweekly payrolls.  In the years that 27 pay periods pop up, the employees' annual salaries are all divided by the 27 pay periods.  I'm not aware of one instance in which an employee caused a stink because they were shorted in the payment of their annual salary. 

It is shorting employees and I've described why in a previous post.

Working for an employer who does this is a reason to look for work elsewhere.  It also may be illegal in your state or cause you to fail an exempt salary test.  Then you'd have to pay all your salaried employee overtime.

I'm not a labor attorney, but I have spent hours on this theory and read up on it in order to ensure we have a correct implementation in QuickBooks (we do.)

Here is a link that describes the case where some employers do reduce the salary:  www.ctemploymentlawblog.com/20...

Note the text, "Legal issues can arise from reducing the bi-weekly salary amount. "

Here is another conversation that seems informative: www.payrolltalk.com/viewtopic....

Note the text:  "The short answer is that legally each pay period stands by itself and that the concept of an annual salary is not a legal concept but just something that companies pretends exist. If an employer really wants to mess around with the pay period salaries they first research the laws of their state's on notification and make sure that they give their employee's adequate legal notification. Past that anyone working for an employer who tries playing with the 26/27ths of the BW salary every few years is urged to try filing a wage claim. Might work. Might not work, but there is nothing in law that makes it easy for an employer to easily manipulate pay period salaries to achieve a legally fictitious annual salary."

Another link:  www.payrolltalk.com/viewtopic....

Another: community.blr.com/hr/forums/thread/4173.aspx

I guess you can count your blessings then :)

Sorry Tim, I didn't see anything in any of your research that has any legal basis one way or the other.  For the most part it appears that what you have linked up is the same type of discussion we have been having.  Let's just leave it at we agree to disagree.  You aren't going to change my opinion and I'm not going to change yours.   

I agree with IRMN.  The contract is for $52,000 per year, NOT $2,000 per pay period.  How can you conceivably arrive at the conclusion that you're legally obligated to pay a person $54,000 every 7th year (0.14 x 7), when you're holding in your hand a valid contract for $52,000 per year?  By that logic, you'd really need to break it down to fractions of a day, maybe to minutes, in order to avoid a lawsuit.  It makes a mockery out of the whole contract.  Come and get me, coppers!

Interesting.  The American Institute of Professional Bookkeepers (AIPB) has some suggestions:
Option 1: Divide the total salary among the 27 pay periods rather than 26. This will result in smaller amounts in each paycheck. if you want to do this, be sure to inform your employees, so they don't complain.
Option 2: Pay the same amount in each pay period as you did in 2008. This will result in an effective increase in pay for these employees. If you do this, inform employees, so you can take credit for the increase.
Option 3: Adjust the last paycheck of the year so that the total pay for the year is the same as the prior year.
 

Would they would make these suggestions knowing that it could potentially violate laws??

The experts in this area will tell you that there is no such thing as an 'annual salary', though one is often quoted to employees, because it sounds good and is easier to understand.

A salary is based on a pay period, such as weekly, every other week, or twice a month. As a result,  professional HR departments will include in their new-hire or rate-change paperwork for each employee the employee's per period pay rate, such as "$4000 per pay bi-weekly period."

Each State mandates the salary periods that are allowable, and sometimes provides an exception process. For example, Some states require weekly pay periods, but you can file a form to ask them to allow for bi-weekly pay for your company. Other states do not grant exceptions. These rules are setup to protect employees.  Yearly is not an acceptable period in most or all states.

By definition, salaries are fixed-amounts paid per pay period. They do not change. For example, you don't reduce the salary because the employee had nothing to do one day and so you asked them to go home.  Similarly, they do not change because the employee goes home early.  They also don't change on the last payroll of the year you desire to round the payroll a few cents so that the annual salary paid exactly matches what you quoted.

Any of these types of actions put an employer into the position of failing the salary test, which could make the employer subject to back pay and overtime wages and taxes and late penalties for several years.

As Examples:

1. If you quote an employee a $100,000 per year salary, and then pay them bi-weekly 3846.15, at the end of the 26 pay periods you will have only paid them 99,999.90.  do you owe them 10 cents?  No.

2. If you quote an employee a $57,000 per year salary, and then pay them bi-weekly 2192.31, at the end of the 26 pay periods you will have paid him 57,000.06.  Can you dock that last paycheck 6 cents? No.

If you have agreed in writing or through practice on a $2000 per week salary for an employee and then you change that salary to 1925.93 per week in order to make the payouts for the calendar year equal $52,000, but you are paying for 27 pay dates (work for 27 pay periods) you will be paying the employee less wages per period worked. Shorting them.

The reason a bookkeeper's association might give the sort of advise posted above is because they are not an association of Payroll or HR professionals with expertise in payroll in your state and at the federal level.

I agree with Tim.

If you agree to pay $52,000 per year.   In this case, a year is 26 biweekly pay periods whether those fit within a calendar year or not.

If there are 27pay periods in a calendar year, most if not all of the first pay period in the 27 period calendar year is actually payment of wages for the prior calendar year.

Tim - that was a very polite way to say that the bookkeeper's association doesn't know what they are talking about.  I don't know anything about the association, but I don't think you are going to make a lot of friends there. 

However since you feel that HR professionals are the only ones with proper expertise in the area I thought I would throw the following link out for some general info:

http://www1.umn.edu/ohr/compen...

It comes from the Office of Human Resources at the University of Minnesota.  Maybe I'm a bit partial since I attended college through that system but I thought one Q&A on the page was quite interesting and I copied it below:

Q. Will Faculty and P&A employees on a full year (A term) appointment see a change in bi-weekly pay as a result of the extra payday?
A. Yes. Academic employees receive a Notice of Appointment with an appointment term salary. For full year (A term) term Faculty and P&A employees, bi-weekly pay is calculated by dividing the appointment term salary by the number of pay periods. In FY11, the denominator will be 27 pay periods rather than the typical 26, so bi-weekly paychecks will be smaller; however, over the appointment term, the total salary remains the same.

If that logic is good enough for the U of M it is good enough for me.  I think I'm done with this subject and think I will be moving on to other issues.

Teachers are an example of a special case in the payroll laws. This is because they are under contract for one or more school years and are paid a total amount for each school year (or, perhaps, each semester or quarter that they work.)

Sometimes they are paid the contract amount only during the contract period (say, 9 or 10 months) and sometimes, for their convenience, they are paid the amount over 12 months.

I still see a lot of misconceptions about this issue. Even the major HR and accounting firms seem to have this mixed up. The first is that there are 27 'pay periods' in a year. There can never be 27 pay periods in a year. No year is 54 weeks long. There are 27 'pay dates' in a year.

My company is opting to divide yearly salaries by 27 in 2010. They are using the same logic that employees will otherwise receive an 'extra' check if they don't make the change. I think we can all agree though, that no one is receiving a check for time they did not work. This change means that an employee that makes $50,000 a year will be paid $50,000 in 2010. The issue I have is that the actual pay periods this is based on run from December 14th, 2009 until December 26th, 2010. This means the employee will have worked almost 54 weeks for 52 weeks of pay.

I have also raised another scenario. Assume Employee A earns $50,000 a year. You divide Employee A's pay by 27 periods in 2010 and pay him $1,851 every pay period. In December you hire Employee B at $50,000 a year. Would you divide Employee B's salary by 27? I don't think you can use the argument that he will be over paid if you divide by 26. But if you divide by 26 for employee B, he will be paid more for the same 2 week period than employee A. Is that fair?

The bottomline is that companies that divide salaried employees pay by 27 will actually benefit from this and the employees lose. If we look at it from a P&L perspective, the company will only show a $48,148 expense for the $50,000 employee in 2010. This is because the employee's salary is accrued at a lower rate.

When we have 3 paychecks in a month, it does not negatively effect the P&L, because of the accounting practice of accruing. Having 27 paychecks in a year is no different.

There are more than 26 weeks in a year, there are 26 weeks and 1day, (14*26=364 days) or 2 days if it is a leap year.  Bi-Weekly pay means that the extra 1-2 days is rolled into the next pay period.  Every 4 years you pickup 5days, each year the days pay is "rolled into" the next year. 

In the NYCB example, the first day 1/1/10 was supposed to be a payday for the prior 2 weeks.  If they reduce your pay it is because they do not understand accural accounting.  You have earned that pay, over the days you have worked.

They are neglecting that there is more than 26 weeks in 1 year, and that you have gradually accumulated 1 day/year in accured days. 

 I agree with Tim.