Question

what does an organization need to do if they have 27 bi-weekly pay periods in the year?

Answer 1

When the payroll is paid on a bi-weekly basis, there are 26 paychecks in the year. But sometimes (in case of a leap year like 2020), there may be 27 paydays instead of 26.

What should an organization do in such cases?

There are two most feasible options

1. Divide the entire annual number by 27 and pay accordingly.

Example, if A had total income of $ 50,000. He would receive 50,000 / 26 normally, that is, $1,923 per period.
In this case it would be $ 1,852 per period for 27 periods. Total payout remains same more or less.

2. Pay an extra amount for the 27th period. In this case the total payout would increase. Which would again decrease in the next period. So proper communications must be made with the employees so that there are no discrepancies.

Not just this, the following must also be taken care of

-Payroll taxes
The pay amount would also impact the social security as well as medicare amount contribution by both the employee and the employer. Some employees might reach the limit earlier in case of extra payment during the year.

-Employee benefits
If additional salary is paid then contribution to 401k would also increase.

-Tax Year for W-2s
It might create discrepancy with the year column.