How Many Paychecks in a Year with Biweekly Payroll

Managing payroll is a crucial task for any HR team, and understanding the details of pay schedules is essential to avoiding confusion and ensuring seamless operations. When it comes to biweekly payroll, many employees and employers often wonder how many paychecks are issued in a year. While it’s commonly assumed to be 26, the answer can vary depending on the year.

In fact, employees on a biweekly pay schedule can receive 27 paychecks in certain years due to the way the calendar days align. This is just one of the factors HR professionals must consider when planning payroll.

In this blog, we’ll break down the specifics of biweekly pay periods, explain how the number of paychecks can differ each year, and compare biweekly payroll with other pay schedules.

By the end, you’ll have a clearer understanding of biweekly payroll and how to manage it effectively for your team. Let's begin with understanding what biweekly payroll means in brief.

What is Biweekly Payroll

Biweekly payroll is a system where employees receive their paychecks every two weeks, typically on the same day of the week, such as every other Friday. This schedule results in 26 pay periods per year, with each pay period spanning 14 days.

For salaried employees, their annual salary is divided by 26 to determine the gross amount per paycheck. For hourly employees, their total hours worked in the two-week period are multiplied by their hourly rate to calculate their earnings for that period. Overtime is calculated based on the total hours worked over the two-week period, which simplifies compliance with overtime regulations.

Biweekly payroll is widely adopted across various industries in the U.S., including education, health services, and leisure and hospitality. According to the U.S. Department of Labor, approximately 43% of U.S. businesses utilize a biweekly pay schedule.

Now, let's take a closer look at how this system works in practice and why it’s so effective for both employers and employees.

How Does Biweekly Payroll Work?

With biweekly payroll, employees are paid every two weeks, resulting in 26 pay periods per year. Each pay period spans exactly 14 days, making it easier for HR teams to track hours worked and calculate overtime. This regular schedule simplifies payroll processing and ensures compliance with labor laws.

For salaried employees, the annual salary is divided by 26 to determine the amount earned per paycheck. For example, if an employee makes $52,000 a year, they would receive $2,000 per paycheck before any deductions.

For hourly employees, their pay is calculated by multiplying their hourly rate by the total hours worked in those two weeks. Overtime pay is calculated based on the total number of hours worked over two weeks, ensuring that the standard 40-hour workweek is maintained.

This payroll system benefits both employers and employees. Employers find it easier to manage, especially when dealing with hourly workers and overtime. Employees appreciate the consistency of biweekly pay, which enables them to budget and plan their finances more effectively.

However, there’s a unique quirk to the biweekly payroll system that can throw off both employers and employees, the 27th paycheck anomaly. Let’s explore the causes of this issue and its impact on payroll.

The 27th Paycheck Anomaly

Typically, employees on a biweekly payroll schedule receive 26 paychecks each year. This is because there are 52 weeks in a year, and when you divide that by two, it gives you 26 pay periods.

However, every 11 years or so, a quirk in the calendar causes an extra paycheck. This happens because the calendar year is 365 days (or 366 in a leap year), and it’s not perfectly divisible by 14, which is the length of a biweekly pay period.

For example, in 2021, employees on a biweekly pay schedule received 27 paychecks, as January 1st fell on a Friday. This misalignment of days created an additional pay period. The next occurrence will be in 2027.

While an extra paycheck can be a nice surprise for employees, it creates challenges for employers. The additional payroll expense can strain budgets if not planned for, especially when it's unexpected.

Also, the 27th paycheck can impact things like benefit deductions and tax withholdings, particularly for contributions tied to annual limits (like 401(k) plans). HR teams must be prepared to manage these aspects and keep employees informed about any changes.

Now, let’s compare the biweekly payroll system with other common pay schedules to understand its advantages and challenges better.

Comparison with Other Pay Schedules

Understanding the differences between various payroll schedules is crucial for you when selecting the most suitable system for your organization. Each pay frequency has its own set of advantages and considerations that can impact budgeting, administrative workload, and employee satisfaction.

Here's a comparative overview of the most common pay schedules:

Key Differences Explained:

• Frequency of Pay: Weekly schedules offer the most frequent paychecks, which can be beneficial for employees who need a regular income. However, this comes with increased administrative efforts. Biweekly schedules provide a balance, with 26 paychecks per year, though in certain years, an extra paycheck may occur, requiring careful budget management.
• Administrative Complexity: Monthly payrolls are the simplest to administer, with only 12 pay periods per year. Semi-monthly payrolls, although predictable, can complicate calculations for hourly employees due to the varying number of days in each pay period.
• Employee Budgeting: More frequent pay schedules, like weekly or biweekly, can help employees manage their finances more easily. In contrast, monthly pay schedules may require employees to plan their budgets more carefully due to the longer intervals between paychecks.

Selecting the appropriate pay schedule involves balancing administrative capabilities, employee needs, and financial considerations. It's essential to evaluate how each option aligns with your organization's operations and workforce preferences.

Now, let’s look at how biweekly payroll impacts salary and deductions.

Impact on Salary and Deductions

In a biweekly payroll system, employees receive 26 paychecks annually. For salaried employees, their annual salary is divided by 26 to determine the gross pay per paycheck. For example, an employee earning $52,000 annually would receive $2,000 per paycheck before deductions. This consistent distribution aids in budgeting and financial planning for both employees and employers.

Deductions:
Deductions such as taxes, benefits, and retirement contributions are applied per pay period. These deductions are typically prorated over the 26 pay periods. However, in years with 27 paychecks, employers must decide whether to:

• Prorate deductions over all 27 pay periods: This results in slightly smaller deductions per paycheck.
• Skip deductions during the extra paycheck: This approach increases the net pay for that period but requires careful communication with employees to avoid confusion.

You should ensure that deductions are adjusted appropriately to maintain compliance and avoid exceeding the annual limits for benefits, such as 401(k) contributions.

Planning for Extra Paycheck Years

Employee Considerations:
In years with 27 paychecks, employees receive an additional paycheck. While this may seem like a bonus, employees need to plan accordingly. They might consider using the extra paycheck to:

• Save for future expenses
• Pay off outstanding debts
• Make significant purchases

Proper planning ensures that the extra income is utilized effectively and doesn't disrupt financial stability.

Employer Considerations:
Employers should anticipate the additional payroll expense in years with 27 paychecks. It's advisable to:

• Budget for the extra paycheck in advance
• Communicate with employees about the occurrence of the extra paycheck
• Adjust benefit deductions as necessary to comply with annual limits

By proactively addressing these factors, employers can maintain smooth payroll operations and employee satisfaction.

Conclusion

Managing payroll can be a constant challenge for HR professionals. Between tracking pay periods, ensuring compliance, and navigating unexpected payroll expenses like the 27th paycheck, it’s easy to feel overwhelmed. But imagine when your payroll runs smoothly, employees are paid on time every time, and you can focus more on strategic HR initiatives instead of being bogged down by the details.

This is where Wisemonk comes in. We specialize in simplifying the complexities of payroll, ensuring that everything from compliance to payroll processing is handled with ease.

Whether you’re managing biweekly pay schedules or adapting to extra paycheck years, Wisemonk’s comprehensive solutions help you avoid the headaches that often come with payroll management.

Partner with Wisemonk today to turn payroll management into one less thing to worry about.

FAQs

Q: How many paychecks do employees receive in a typical biweekly payroll system?
A: Employees typically receive 26 paychecks annually. However, due to calendar variations, employees may receive 27 paychecks in certain years.

Q: How does a 27th paycheck affect payroll and deductions?
A: In years with 27 paychecks, employers may either prorate deductions across all paychecks or skip deductions during the extra paycheck, depending on their strategy.

Q: What are the advantages of biweekly payroll compared to other schedules?
A: Biweekly payroll provides a predictable and consistent pay schedule, balancing the frequency of payments with ease of payroll processing. However, an extra paycheck in certain years requires careful budgeting.

Q: How should employers prepare for a year with 27 paychecks?
A: Employers should budget for the additional payroll expense, adjust benefit deductions as needed, and communicate with employees to avoid confusion.

Q: How can Wisemonk assist with managing biweekly payroll?
A: Wisemonk simplifies payroll management by ensuring compliance, handling payroll processing, and offering strategic solutions to manage challenges like extra paychecks effectively.