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How to Handle Extra Pay Periods Caused by the Calendar

Author: Alice Gilman

A calendar year and an employer's pay periods do not always coincide precisely. Approximately every 11 years, an employer that pays employees on a biweekly basis will have an extra pay period. An employer that pays employees on a weekly basis will have an extra pay period every five or six years. The exact year in which an extra pay period falls depends on the day the employer designates as the payday.

An employer must resolve three separate questions regarding the extra pay period:

  • How will it impact exempt employees' pay?
  • How will it affect income tax withholding for all employees?
  • How will it affect employees' benefits?

Regardless of how an employer deals with the extra pay period, decisions must be made far in advance, since corporate budgeting and tax liabilities are involved.