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For employers that run biweekly payroll, 2026 introduces a unique scheduling challenge. Because Friday, Jan. 1, 2027, is a federal holiday, many employers that typically use a Friday pay date will need to shift that payday earlier in the week—placing it in 2026. As a result, under most payroll structures, Thursday, Dec. 31, is likely to become the final payday of 2026. The cadence of 27 payroll dates happens slightly less than one time per decade (roughly once every 11 or 12 years) due to mismatching days (365 days per year and 14-day pay cycles) and an extra day for leap year happening every four years.

This extra payroll period can impact salaried employee requirements, benefits contributions and more, creating potential compliance and operational challenges.

This checklist provides employers with an overview of the impact of the extra biweekly payroll period, covers general strategies for payroll in 2026 and offers tips for employers to manage payroll in 2026.

This checklist is not exhaustive and does not account for all pay and compensation requirements. Due to the patchwork of rules for both single-state and multistate employers, organizations should consult with local legal counsel for guidance on payroll.

Impact on Payroll

A year with a potential extra pay period can create several payroll challenges, particularly for employers with salaried employees who must be paid a predetermined amount each pay period. The distinction between a 26-pay-period year and a 27-pay-period year often leads to mistakes that can affect employee compensation, benefits administration and overall payroll accuracy.

Here are common mistakes, compliance requirements and key factors employers should review:

EAP Exemption Compliance

Salaried workers are paid a predetermined amount for each pay period. Under the federal Fair Labor Standards Act (FLSA), employees who are properly classified as exempt under the executive, administrative and professional (EAP) exemptions are not entitled to overtime pay. Specifically, to qualify for exemption, employees generally must:

Be paid on a salary basis
Be paid a salary that meets the specified minimum amount per week (currently $684)
Meet certain duties tests

Some states impose higher salary thresholds or have unique exemption criteria that employers must also consider. Being paid on a salary basis means the employee regularly receives a fixed amount of compensation each pay period, typically on a weekly or less frequent schedule. This amount cannot be reduced due to variations in the quality or quantity of work performed. With limited exceptions, exempt employees must receive their full salary for any week in which they perform any work, regardless of the number of days or hours worked.

Under the FLSA, employees must maintain salary levels to remain exempt under EAP. In a year like 2026, where an additional pay period may occur, employers that simply divide annual salaries across 27 cycles instead of 26 may unintentionally reduce employees’ weekly pay. Thisreduction can place employees below the minimum salary threshold required to maintain exempt status.

Notice Requirements

Before making adjustments to payroll, employers should check federal, state and local requirements for notifying employees before adjusting pay frequency or amounts. Notably, some states have requirements on how notice for changes to payments should be handled.

Tax Withholdings

Whether an employer has 26 or 27 payroll cycles, correct tax withholding calculations must be maintained across all pay periods. While IRS withholding tables typically accommodate this, employers are responsible for ensuring their payroll software is updated and properly configured for the extra period to prevent under-withholding.

Overpayment

Adding an extra payroll cycle is a common approach many employers take during a 27-pay-period year. However, doing so carries the risk of unintentionally overpaying salaried employees. Notably, issuing an additional paycheck increases annual payroll expenses—potentially by up to 3.85%—before factoring in the added cost of benefits contributions and related liabilities. For large employers, this can translate into a substantial increase in total payroll spend. For smaller employers, even modest, unbudgeted payroll increases can create significant financial strain or disrupt annual budgeting assumptions.

Benefits Contributions

Employers make and allow for benefits contributions in cadence with their payroll. An extra payroll cycle can impact mandatory statutory deductions (taxes), health insurance, contributions to accounts like health savings accounts (HSAs) and flexible spending accounts (FSAs), voluntary benefits (e.g., dental and vision), retirement accounts (such as a 401(k)) and more. Generally, even employers planning for 27 payroll cycles in 2026 complete benefits deductions for the first 26 paychecks.