In some years, biweekly pay schedules land on 27 paydays instead of the usual 26. This affects how your salaried biweekly employees are paid. This article explains why it happens, your two options for handling it, and what to review before you decide.
This article applies if all three of the following are true:
You run biweekly payroll in Gusto (employees paid every two weeks)
You have one or more salaried employees on that biweekly schedule
The current or upcoming year has 27 paydays instead of the usual 26
Note: For 2026 specifically, this applies only if your first biweekly payday of the year was January 2, 2026.
This article does not apply to:
Hourly employees (paid for hours worked, not from a fixed annual salary)
Commission-only employees (pay not derived from a fixed annual salary)
Weekly, semi-monthly, or monthly pay schedules
Biweekly schedules where the first payday of the year falls later in January — those years have 26 paydays as usual
Important: Reading this mid-year? You can still adjust salaries after paychecks have already gone out. Skip ahead to Option 2, Step 1 for the mid-year calculation.
This article applies if all three of the following are true:
You run biweekly payroll in Gusto (employees paid every two weeks)
You have one or more salaried employees on that biweekly schedule
The current or upcoming year has 27 paydays instead of the usual 26
For 2026 specifically, this applies if your first biweekly payday of the year was Jan. 2, 2026.
This article does not apply to:
Hourly employees (paid for hours worked, not from a fixed annual salary)
Commission-only employees (pay not derived from a fixed annual salary)
Weekly, semi-monthly, or monthly pay schedules
Biweekly schedules where the first payday of the year falls later in January — those years have 26 paydays as usual
To confirm whether your business has a 27-payday year, follow these steps.
Open your pay schedule in Gusto.
Count the paydays in the calendar year.
If there are 27, this article applies. If 26, you can stop reading.
Important: Reading this mid-year? You can still adjust salaries after paychecks have already gone out. Skip ahead to Option 2, Step 1 for the mid-year calculation.
A biweekly pay schedule pays employees every 14 days. Twenty-six biweekly periods cover 364 days, but a calendar year is 365.25 days, so the schedule drifts by about 1.25 days each year. Periodically, that drift produces a calendar year with 27 paydays. The exact years depend on when your first payday of the year falls and how Gusto handles paydays that land on holidays or weekends.
Gusto calculates each salaried biweekly paycheck as annual salary divided by 26. In a 27-payday year, Gusto does not automatically change that calculation. As a result, each salaried biweekly employee gets one additional full paycheck at their regular per-period amount — about 3.85% more gross pay than their stated annual salary for that year.
You have two ways to handle this. The right choice depends on your budget, the states where your employees work, and how much administrative effort you can take on. Here's how the two options compare.
Option 1 — Pay 27 full checks
Option 2 — Manually adjust annual salary
What happens
Gusto runs payroll as normal. Each salaried biweekly employee gets 27 paychecks of their regular amount.
You reduce each affected employee's annual salary in Gusto so 27 paychecks total their intended annual compensation.
Annual gross pay per employee
About 3.85% above stated annual salary
Equals stated annual salary
Per-paycheck amount
Unchanged
Slightly smaller for the affected year
Effort for you
None
Higher — calculate, give written notice, update Gusto, communicate to employees, revert at year end
Employee notification
Optional but recommended
Required — most states mandate written notice of any rate-of-pay change
Benefits deductions
Review needed — extra deduction cycle can push 401(k), HSA, and FSA over IRS caps
Review needed — same caps apply
Main risk
Higher payroll cost than budgeted, benefits overcontribution, W-2 gross higher than offer-letter salary
State wage-notice violation, FLSA exempt-salary threshold breach, forgetting to revert (causes underpayment the next year)
How to decide. Option 1 is simpler and avoids legal risk around wage notices, but it costs you roughly 3.85% more in salaried biweekly payroll. Option 2 keeps annual compensation aligned with stated salaries but adds administrative steps and carries state-by-state compliance considerations. If you have exempt employees in states with high salary thresholds — like California, New York, Washington, Colorado, or Alaska — Option 2 may not be available for those specific employees.
Pro tip: For questions specific to your business, work with a CPA or HR professional. We can walk you through the mechanics in Gusto, but the right call for your team often depends on factors only your advisor can weigh in on.
60 to 90 days before the year starts — Decide which option you will use. If adjusting (Option 2), begin calculations.
30 to 60 days before the year starts — Send written notice to affected employees (Option 2 only).
Before the first payroll of the year — Make salary adjustments in Gusto (Option 2 only). Review benefits deductions (either option).
Throughout the year — Monitor benefits caps for any employee on flat-dollar elections.
First payroll of the following year — Revert salary adjustments (Option 2 only).
Continue running payroll as usual. Gusto pays each salaried biweekly employee their normal per-paycheck amount across all 27 paydays. Each affected employee's annual gross pay is about 3.85% higher than their stated salary for the year.
To prepare for Option 1, follow these steps.
Budget for the additional cost. Multiply your total annual salaried biweekly payroll by approximately 3.85% to estimate the additional expense for the year. Add it to your payroll budget.
Review benefits deductions. Even though salaries do not change, the 27th paycheck creates an extra deduction cycle. See Benefits deductions to review below.
Tell your employees. A short note prevents confusion when total W-2 wages exceed the stated annual salary.
Subject: A note about your [YEAR] paychecks
Hi [Employee Name],
Because of how the calendar falls in [YEAR], our biweekly payroll schedule has 27 paydays this year instead of the usual 26. You will get one additional full paycheck at your normal amount. Your annual salary is not changing — this is a one-time calendar event. Your W-2 for [YEAR] will reflect 27 paychecks of regular pay.
If you have questions, let me know.
You can reduce each salaried biweekly employee's annual salary in Gusto so 27 paychecks of the reduced amount add up to the employee's intended annual compensation. Gusto does not do this automatically — you handle the calculation, the legally required written notice, and the reversal at year end.
This option requires real planning and carries legal risk if mishandled. Work through every step below before making any changes in Gusto.
Pro tip: Whenever possible, make this adjustment before the first payroll of the affected year. Mid-year adjustments work, but require more math and a more complicated employee notice.
If you are adjusting before the first payday of the affected year, divide each salaried employee's actual annual salary by 27, then multiply by 26. Enter that figure as the new annual salary in Gusto.
Example for an employee with a $78,000 annual salary:
$78,000 ÷ 27 = $2,888.89 (the per-paycheck amount you want them to get across 27 checks)
$2,888.89 × 26 = $75,111.11 — enter this as the annual salary in Gusto
Gusto calculates: $75,111.11 ÷ 26 = $2,888.89 per check × 27 checks = $78,000.07 total for the year
If you are adjusting mid-year (after one or more paydays have already happened), back into a new per-check amount that hits the original total over the remaining paydays.
Example for an employee with a $78,000 annual salary, 10 paychecks already paid at the unadjusted rate:
Original per-check: $78,000 ÷ 26 = $3,000.00
Already paid this year: 10 × $3,000.00 = $30,000.00
Remaining target: $78,000.00 − $30,000.00 = $48,000.00
Remaining paychecks: 27 − 10 = 17
New per-check amount: $48,000.00 ÷ 17 = $2,823.53
New annual salary to enter in Gusto: $2,823.53 × 26 = $73,411.76
At year end, revert to $78,000
If any affected employee is classified as exempt under the Fair Labor Standards Act (FLSA) — meaning they are salaried and not eligible for overtime — confirm their adjusted per-period pay does not drop below the applicable minimum salary threshold.
Federal minimum: $684 per week ($1,368 biweekly)
State minimums vary. California requires $1,352 per week ($2,704 biweekly) for most exempt employees in 2026. New York, Washington, Colorado, and Alaska also set thresholds above the federal floor.
If adjusting an employee's per-paycheck pay would bring it below the applicable threshold, do not adjust that employee — pay them 27 full checks (Option 1) instead. Otherwise their exempt classification could be challenged.
Note: Under Option 2, the employee's actual annual compensation and effective hourly rate do not change — only the per-paycheck amount changes for the affected year. State notice requirements still apply because the per-paycheck rate is changing.
Most states require written notice before any change to an employee's rate of pay, even when total annual compensation stays the same. Examples:
Maryland — written notice at least one pay period in advance
Virginia — written notice of any rate-of-pay change
Washington, D.C. — written notice within 30 days
New York — written notice at least 7 days before the change
California — written notice at or before the change to pay rate
Check your state's wage-payment law for the specific requirement. When in doubt, provide written notice at least 30 days in advance of the first reduced paycheck.
For salaried nonexempt employees, the notice should also list the new overtime rate. Use the Employee communication template at the bottom of this article.
Important: Set the effective date as the first day of the new pay period. If you set the effective date mid-pay-period, Gusto will prorate that paycheck — splitting it between the old and new rates — which throws off the per-check math you calculated in Step 1. For more on how proration works, see Salaried employee pay rates and custom earning types.
To update an employee's salary, follow these steps.
Go to People → [Employee] → Compensation.
Edit the current compensation entry.
Enter the calculated annual amount (for example, $75,111.11 for the beginning-of-year case above).
Set the effective date to the first day of the new pay period — the first payroll of the affected year, or the first day of the next full pay period for a mid-year change.
Save.
To adjust multiple employees at once, use Bulk Edit Compensation (Company → Settings → Bulk actions). You can set the new wage amount, effective date, and reason for change for many employees in one upload.
Pro tip: If you need to make the change mid-pay-period for any reason, plan to manually prorate that first check so the totals still match your Step 1 calculation. See the proration article linked above for guidance.
The 27th paycheck creates an extra deduction cycle for any benefit deducted on a per-paycheck basis. This applies whether you are on Option 1 or Option 2 — see Benefits deductions to review below for the full checklist.
This step is critical. On the first payroll of the following year — when your pay schedule returns to 26 paydays — you need to reset each adjusted employee's annual salary back to its original amount. If you do not, the employee will be underpaid for the entire next year.
Set the reminder now. Attach the exact employee list and original salary amounts so future-you can revert without digging.
An extra pay period creates one additional deduction cycle for any benefit deducted on a per-paycheck basis. Review this regardless of whether you are on Option 1 or Option 2.
For these benefits, 27 deductions at the employee's per-paycheck rate may push contributions over the annual IRS cap:
401(k), 403(b), or 457(b) elective deferrals — 2026 limit is $24,500 (plus $8,000 catch-up at age 50+, plus $11,250 catch-up at age 60–63). If employees elect a flat dollar amount per paycheck, 27 deductions may exceed the limit. Consider switching them to a percentage-based deferral for the year, or coordinate with your plan administrator to hard-stop contributions at the cap.
SIMPLE IRA or SIMPLE 401(k) — 2026 limit is $17,000 (plus $4,000 or $5,250 catch-ups). Same approach as above.
Health Savings Account (HSA), self-only — 2026 limit is $4,400 (plus $1,000 catch-up at age 55+). Confirm 27 deductions at the elected rate do not exceed the limit. Adjust per-check amounts if needed.
HSA, family — 2026 limit is $8,750 (plus $1,000 catch-up at 55+). Same as above.
Health Care Flexible Spending Account (FSA) — 2026 limit is $3,400 (carryover max $680). Same as above.
Dependent Care FSA — 2026 limit is $7,500 ($3,750 if married filing separately). Same as above.
Health insurance, dental, and vision premiums are typically billed to the employer monthly, not per pay period. An extra deduction cycle means you would collect more from the employee than you owe the carrier that month, causing the employee to be over-deducted.
You have two ways to handle it:
Spread the deduction over 27 periods — calculate the 27 pay period deduction total (monthly premium × 12 ÷ 27 pay periods)
Skip the deduction on the 27th payroll — keep per-paycheck amounts unchanged and suspend the deduction once for the year
Coordinate with your broker or carrier on which approach they prefer.
Note: If you spread deductions over 27 periods and an employee terminates mid-year, you may end up collecting less than the premium owed for the months they were covered. The employer typically absorbs that or recovers it from final pay.
If your benefits are administered through Gusto (Gusto-managed benefits), you cannot edit the per-paycheck deduction amounts yourself. The good news — you do not need to.
When an extra deduction cycle causes an employee to be over-deducted, Gusto registers the over-deduction and reduces the deduction on the next payroll to bring the year-to-date total back in line with the monthly premium owed. This is expected system behavior and no action is needed on your part.
What you will see:
The 27th deduction processes as usual
On the next payroll, the employee's deduction will be smaller than their typical amount
Year-to-date deductions will match the premiums owed by the end of the cycle
Important: This is expected system behavior, not an error. If something looks off or the auto-correction does not appear to happen, reach out to Gusto support.
Transit and parking benefits are capped monthly, so an extra pay period does not create over-contribution risk.
Educational assistance ($5,250 limit) and adoption assistance ($17,670 per child for 2026) are typically administered as lump-sum reimbursements, not per-paycheck deductions, and are not affected.
If any of your salaried biweekly employees has wage garnishments, adjusting their per-period pay (Option 2) can complicate the garnishment calculation:
Percentage-based garnishments (for example, 25% of disposable income) automatically scale with the new per-paycheck amount.
Flat-dollar garnishments stay constant per check — confirm the adjusted pay still leaves the employee above any minimum-take-home thresholds set by the garnishment order.
Multiple garnishments require special care. Confirm that pay net of all garnishments stays above federal and state minimum-wage protections per period.
If you are unsure, contact Gusto support or your employment counsel before adjusting an employee with active garnishments.
If you choose Option 1 (no adjustment), each paycheck's federal income tax (FIT) withholding stays the same, but the additional paycheck increases total annual withholding by one paycheck's worth. Employees may see a difference in what they owe when they file their taxes. Total annual gross is about 3.85% higher than stated salary, so W-2 box 1 will show the higher figure. For more on how Gusto calculates federal income tax withholding, see How Gusto calculates federal income tax (FIT).
If you choose Option 2 (adjust salaries), each paycheck's FIT withholding is slightly lower because the withholding tables are applied to a smaller per-period gross. Over the full year, total tax withheld roughly matches what would have been withheld at the unadjusted rate spread over 26 paydays. Employees' annual W-2 gross equals their stated salary.
Withholding is always an estimate, and what an employee owes is determined by multiple factors. Employees with questions about their W-4 can view and update their tax withholding elections.
Use this if you are going with Option 2. Adapt it to your tone and add company-specific detail.
Pro tip: State written notice requirements may have specific format or timing rules beyond what this template covers. For state-specific questions, work with your CPA or HR professional.
Subject: Your [YEAR] pay schedule and per-paycheck amount
Hi [Employee Name],
In [YEAR], our biweekly payroll schedule will include 27 paydays instead of the usual 26 because of how specific pay dates fall in the calendar year.
To keep your annual compensation aligned with your stated salary of $[amount], we are adjusting the per-paycheck amount starting with the [date] paycheck.
Here is what is changing:
Your annual salary is not changing. It remains $[amount].
Each paycheck will be slightly smaller — $[new per-check amount] instead of $[old per-check amount].
You will get 27 paychecks in [YEAR] (one more than usual), so your total pay for the year matches your stated annual salary.
This is a one-time calendar adjustment. Starting [date of first paycheck in following year], paychecks will return to $[old per-check amount].
If you have questions, please reach out to [contact].
Why does Gusto not adjust salaries automatically?
Reducing an employee's per-paycheck pay is a change to their rate of pay. Most states require employers to provide written notice before any rate-of-pay change, even when annual compensation stays the same. Because we cannot deliver that legally compliant notice on behalf of every customer in every state, the decision and the notification stay with you.
My employees are hourly. Does this affect them?
No. Hourly employees are paid for hours worked, not from a fixed annual salary divided by pay periods. They are not affected by 27-payday years.
I have salaried employees but they are paid semi-monthly. Does this affect them?
No. Semi-monthly schedules always produce exactly 24 pay periods per year, regardless of how the calendar falls. Only biweekly schedules are subject to 27-payday years.
What if I forget to revert salaries at year end?
Each affected employee will be underpaid by about 3.85% for the following year (the salary you reduced for the 27-payday year will remain in effect over the next year's 26 paydays). Set a calendar reminder now. If you discover the oversight mid-year, restore the original salary immediately and run a one-time make-up payroll to cover the gap.
What about exempt employees in California or other high-threshold states?
If reducing an employee's per-paycheck pay would drop their weekly pay below the state exempt-salary threshold, do not adjust that employee — pay them 27 full checks instead. Otherwise their exempt classification could be challenged.
What about commission-only or hourly-plus-commission employees?
Pay derived from commissions, hours, or piece-rate is not based on annual salary divided by 26 and is not affected by 27-payday years. If a commission-paid employee also gets a base salary component, that base salary component is subject to the same options described above.
Can I just skip the 27th paycheck instead?
No. Skipping a paycheck for any week an exempt employee performs work violates the FLSA salary-basis rule (29 C.F.R. § 541.602) and can strip the employee's exempt classification. For nonexempt employees, it is a straight wage-payment violation. This is not a viable option in any state.