27 pay periods in 2004

Sue Heyen

I just read an article that states some companies will have 27 biweekly pay periods in 2004 instead of the usual 26 due to some "quirk" in the calendar. It states that some companies are adjusting salaried employees' paychecks to account for the extra pay period to make sure they add up to the employees' annual salary for the calendar year. This only affects some companies depending on their pay cycles and the day of the week their payday falls. CIGNA Corp. was one company that made the adjustment when this occured in 1992. The assistant director of the wage and workplace standards division of the Connecticut Dept. of Labor acknowledged that companies can reduce paychecks like CIGNA plans to do as long as they give workers prior written notice. Other companies facing 27 pay periods have decided against trimming paychecks.

This could have an affect on your 2004 payroll budget or employee morale (depending on the decision made). Have you heard of this and what does your company plan to do? Thanks for any insight you can provide.

SMace

We are skipping a paycheck at the end of the year. This has already been communicated.

Paige

We are not going to make any adjustments and will pay out the 27 pay periods. Whew!

Pork

We pay by the week and if the accounting world chooses to have a 53 week pay year so be it! Another good reason for a week pay program verses a bi-weekly or monthly program. Regardless of the January 1 date and which day of the week it falls upon we are prepared to cut off our business year in the last full week of December. Any income generated after the business year ends is counted against the next business year. By hiring and enrolling based on an annualize base rate and paid weekly one stops the worry of "skipping a check" or making any kind of adjustment.

May you all have a Blessed day!

Pork

moneyman

[font size="1" color="#FF0000"]LAST EDITED ON 08-05-03 AT 11:10AM (CST)[/font][p]I think that the bi-weekly schedule can be accounted for in the same fashion. We have a 2-week period that ends on Saturday and we pay out on the following Friday. The pay date is the determining factor for our books, being cash basis we do not have to accrue any salaries. But even if you did, it doesn't mean that you have to adjust any schedule because of the 27 periods.

I think some people get confused when they are quoted an annual salary. We have had it interpreted that they will physically receive checks in that year for that amount. What we NOW always explain is that this is a base pay that will be divided into 26 periods (or divided by full-time hours 2080 for an hourly base rate). Also, since our annual increases are effective January 1 and a 2-week period almost always encompasses one week from the old year and one week from the new year, they still would not physically receive that annual salary anyway.

I don't think that any adjustment needs to be made because we are always paying for a prior 2-week period and just because that year happened to catch an extra Friday payday doesn't change the fact that the employee already worked a 2-week period.

I think if you skip a period or adjust to reduce for 27 periods, you are actually cheating the employee out of time, UNLESS you are actually paying for time worked from Jan 1 through Dec 31 only. But, I have not know many companies who will pay on December 31st for the time worked up until that same date.

MrCreosote

[font size="1" color="#FF0000"]LAST EDITED ON 08-05-03 AT 11:30AM (CST)[/font][p]This will apply to us in 2004 and our VP of Finance decided that we do not need to make any adjustments.

His explanation was that the salary is accrued as it is earned, so even though the check might be paid on Jan 2, the expense is on the books for the previous year.

NaeNae55

Employees are paid at a RATE of $x.xx per year. That rate assumes 52 work weeks. If the employee ends up working more than exactly 52 weeks, then they should be paid accordingly. By making an adjustment of not paying one pay period to make the year 'equal' 26 pay periods, you are cheating your employees. A company I worked at discussed doing just that several years ago. If they had gone through with it I would have looked for another employer.

Is anyone considering the possible 'contract' issues that might come up if you decide to skip one paycheck? If you claim to be an at-will employer and make sure that nothing in your offer letters, etc. says the employee will be paid at an annual salary to protect your at-will status, don't you wipe all that out by switching to the 'annual pay' card in years like this?

Just my $.02.

E Wart

I agree with MoneyMan and others. It really depends on how you pay your employees. We pay weekly and employees get paid for what they worked the week before. If we reduced the number of paychecks, we would short them for a week. (A lot of this is accounting... you pay one extra one year and one short the next because of how the weeks fall.) I wouldn't worry about it, again, depending upon how your folks are paid. (If they are paid the 1st and the 15th, it would still be 24 checks. If they are paid weekly, it will be 53, if bi weekly will be 27.) Think about it as taking an hourly salary and multiplying it time the number of hours "worked' in the pay period. Then you can understand easier.
E Wart

Don D

Having been advised by attorneys to never quote an annual salary (some view that as an annual contract)companies I've been with always state in the offer letter that "....which pays $2500 on a bi-weekly basis." I've always considered that an offer letter, accepted and signed by both parties amounts to a contract for a guaranteed amount paid at a guaranteed frequency. How can that be broken or altered at the whim of one party? Let's hear a legal opinion.

moneyman

I had one employment contract prepared by our attorney that stated the annual salary was "to be paid in 26 equal amounts" beginning on his anniversary date and that created the big mess when the doctor decided to leave after a few months. The doctor claimed that his contract guaranteed him the same thing each paycheck, whether it was for the partial period when he started or partial period when he left. When he showed me his contract (which was the first time I saw it, in my office keeping "personnel" files on the doctors makes people act strange) I tried to explain that the intent was to explain a equal bi-weekly pay period.

We ended up paying him what he wanted just to get him out of the way, but, lawyers, you can't live with them you can't live without them.

And no, I didn't keep personnel files on the doctors because I was told not to. And yes, they were employees of the corporation. Bad recordkeeping to the max, but that was the command handed down from up high 8-| (you guys who work with doctor-owners know how it is)

Always Learning in OR

We have 27 pay periods this year, with the final paydate falling on December 31st, 2003! We are not cutting a paycheck because we also pay for the two week period that ends on the Friday before our Thursday pay date. It doesn't present a huge problem other than one deduction for an employer subsidized benefit, and not having the opportunity to do a correction payroll if there is an error on the December 31st payroll. Will you all cross your fingers for me on December 31st? I'll be sure to let you all know if we run into any problems once we've completed the year.