Pay Period Leap Year: Handling 27 Pay Periods

Pay Period Leap Year: Handling 27 Pay Periods

If the question of, “How will you handle 27 pay periods,” doesn’t sound familiar to you, don’t panic. It may not apply to your organization, or if it does, you still have options. 

If your pay cycle is either weekly or bi-weekly, there is a good chance that some years will include an extra payday, although there is some variation to this rule based on the way the calendar falls and the day on which your organization pays employees.

It is also important to note that the extra payday only creates issues for exempt employees who, unlike their non-exempt counterparts who are paid based on hours worked, receive an equal portion of their annual salary each paycheck.

Finally, before agonizing over how to manage an extra pay period, employers should review any and all documents related to the terms of employment that are currently in place, e.g. offer letters or collective bargaining agreements. Specific wording or clauses in these types of documents may actually be the determining factor for which methods remain on the table.

How to handle the "pay period leap year"

Interestingly, despite the variation in the parameters listed above, one area where there is more consistency among local employers is in how they choose to address the pay period leap year.

When asked specifically how they handle years that have 27 versus 26 payrolls for exempt employees, 81% of respondents to 2014 ERC’s Payroll Practices Survey indicate that they “pay as usual.” This overwhelming response of essentially doing nothing has remained true since 2011 when the survey was first administered. Figure 1 below illustrates the other options employers may turn to:

The “other” category elicited several interesting responses, with more than one employer explaining that while in the past they had chosen to divide pay by 27 and adjust benefit deductions, moving forward they would not be making that same choice. They noted that although logistically this change worked smoothly, employees were displeased with a smaller bi-weekly paycheck and overall morale was negatively impacted.

Other considerations

Although these particular employers did not experience any compliance related issues, employers who choose to divide paychecks by 27 should be aware of any lower wage workers on an annual salary. If the new math puts their pay below the FLSA threshold, this would in fact alter their FLSA exempt status and require the employer to pay overtime, etc to these employees for one year.

Another alternative option, although not at all common, was to simply reduce the final paycheck of the year.

As legal experts point out, this final option can also be dangerous in terms of FLSA as well as state minimum wage laws for any salaried non-exempt employees that might fall under the minimum hourly wage during the final reduced pay period—not to mention the likely backlash and drop in employee morale that could accompany a significantly reduced final holiday paycheck.

Ultimately, no matter which option an organization selects to accommodate a 27 pay period schedule, the key is communication with employees. Clearly if any paycheck along the way is going to be smaller, employees will need to know in advance, but even for employers that do nothing this year, communication is still important. For these employees, an extra paycheck could mean as much as a 4% raise, a raise that will be confined only to that year. So whether your payroll budget is staying the same or hitting an all time high with 4% raises, making sure everyone is on the same page will allow for a much smoother and easier transition into the years beyond.

View ERC's Pay Differential Survey Survey Results

This survey reports on common pay differentials from Northeast Ohio employers for hourly employees, including shift differentials, lead premiums, overtime, and on-call pay practices.

View the Results

The Changing Face of Paid-Time-Off

unlimited vacation paid sick leave The Changing Face of Paid-Time-Off

With a lot of attention around employee benefits focused around the 2014 ACA’s employer mandate, another major evolving trend in employee benefits, i.e. paid time off, has been largely overlooked in comparison to the healthcare law. However, two primary topics within the realm of paid time off have made considerable, if not short lived, splashes in the news media over the course of 2014.

Read this article...

Time-Off Roundup: Holidays, Unlimited Vacation and More

Time-Off Roundup: Holidays, Unlimited Vacation and More

Vacation policy: it may be one of the most important components of the compensation package to some people. Offering time-off options to employees is pretty varied, including holidays, vacations, sick leave, personal leave, and bereavement leave. These types of benefits are quite valuable to employees when analyzing the benefits package at a potential new job.

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Is Your Office Halloween Party Scaring the HR Department?

Is Your Office Party Scaring the HR Department

The upcoming holiday season always brings with it an assortment of potential HR headaches (think vacation schedules, alcohol at the holiday party, the list goes on…). But before we even get into November, Halloween presents its own set of pitfalls and concerns that can make HR professionals cringe.

So if you already have a Halloween party on the office calendar this year, here are a few HR-approved tips that you might want to consider.

Tip #1

Remind employees that even though it’s a Halloween party, they are still at a work function. Although the code of conduct may be more or less relaxed at your particular organization depending on your culture, they are still in the workplace.

Make sure to send out an office-wide email with dress code and conduct expectations or information in advance.

You can also reference your Employee Handbook to remind everyone they still have to abide by the organization’s policies.

Tip #2

Provide employees with specific guidelines about costumes in advance.

Again, this may depend a bit on your organizational culture, but whatever the restrictions are, make sure they fit with your policies on harassment, dress code, weapons, etc.

If employees will be wearing costumes throughout the workday, make sure they can perform their basic work functions and still be productive. While this is particularly important for manufacturers who need to be worried about safety of their line employees, you also can’t type on a keyboard very well if your costume includes giant clawed hands.

Tip #3

Take into consideration whether or not some employees may find certain Halloween decorations offensive. While you can’t predict if an employee is going to make a costume choice that is in poor taste (although you can do your best per Tip #1), you, the employer, can take steps to make sure that anything you are contributing to the celebration is well thought out. This is supposed to be fun (for everyone), not create a hostile work environment.

Tip #4

Think about the timing of the event in advance and check with others about their schedules. If your business is going to have clients coming in for meetings (and again, know your culture), you may want to ask employees to refrain from changing into their costumes until after the last guest has left the office for the day.

Timing may also impact whether or not alcohol is a factor, i.e., if it’s a luncheon during the workday, serving alcohol is out of the question.

However, you’ll want to decide if employees will need to change back into regular clothes following the lunch hour festivities and make sure that’s communicated in advance.

Tip #5

Consider a “Harvest” or “Fall” celebration instead. If you have significant concerns over a Halloween themed party and the complications that costumes and decorations bring with them, maybe a Halloween party simply isn’t right for your workplace. There are still plenty of fun team building events or parties you can put on to celebrate the season without even mentioning Halloween.

Halloween Activity Ideas

Pumpkin Carving

If your organization doesn’t have a big budget for Halloween, consider a simple pumpkin carving activity! This is also great for organizations in which time is an issue. Pumpkin carving can be an hour-long, end-of-day activity at 4:00pm.

Candy Corn Guessing Game

This is another great activity for the time-restrained yet festive organization. Have a jar filled with candy corn in a central location or at an HR employee’s desk and take guesses throughout the week on how many pieces of candy corn are in the jar. The winner takes home a $10 giftcard!

Trick or Treating

Adults like candy too! Encourage employees to bring in treats to share with one another. Employees can go office to office or cubicle to cubicle trick or treating! Not only does this result in a festive, fun activity but it promotes engagement and morale between employees.

Happy Halloween from all of us at ERC and good luck! 

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