27 Pay Periods Every 11 years

I was recently asked to explain the issue of 27 pay periods which occurs every 11 years. I will attempt to answer it here; however, as I am not a legal professional, the information posted here should not be used without obtaining a legal explanation…

Before tackling the issue I will explain a few things… Employees paid hourly are paid for each hour worked and therefore are not concerned about the extra pay period… They are paid for it on an hourly basis.

Employees paid monthly or semi-monthly have a fixed number of pays (either 12 or 24) and therefore will not experience an extra pay period.

The only employees that will experience an extra pay period that need to be concerned about it are salaried employees that are paid either weekly or bi-weekly. Employees paid bi-weekly will have an extra pay period every 11 years; whereas, employees paid weekly will have an extra pay period every 5-6 years.

The reason for the extra pay period is quite simple… The number of days in a year are not a multiple of the number of days in a week. Neither 365 or 366 are a multiple of 7. With that in mind, the math for pay periods does not cleanly work out for a calendar year.

Let’s look at the math….
11 years x 365 days = 4015 days
+ 3 days = 4018 days [3 leap years in an 11 year period]
4018 days / 14 days in a pay period = 287 pay periods

Hold that thought for a moment… 287 pay periods in an 11 year period

Let’s do the math the traditional way….
26 pay periods x 11 years = 286 pay periods

As you can see, doing math the traditional way only accounts for 286 pay periods in an 11 year period; however, the employees actually worked 287 periods. They work 1/11 of a pay period extra each year.

So the question now is…. How should the extra pay period be reflected on an employee’s pay cheque? The answer depends on both the employment agreement and company policy…. I’ll explain more….

The below assumes an employee contract stipulates that an employee will earn X amount of dollars per calendar year. That being said, the employer can choose any 1 of the following options:

• Option 1) The extra time worked is included in the annual salary; therefore, no extra amount is due. One of the following method can be used to handle the pay cheques.
  • 1.1) For the calendar year that contains 27 pay periods, divide the annual salary by 27 instead of 26. This will result in a smaller pay cheque each time but there will be 1 more pay cheque.
  • 1.2) Keep the pay cheque amount the same but only issue 26 pay cheques. Skip one pay period. Typically this would be done in a month that has 3 pay days.
• Option 2) Compensate employees for the extra time worked. One of the following methods can be used:
  • 2.1) Pro-rate the benefit so each employee gets 1/11 of a pay cheque for each year they worked in the previous 11 years. This can be done using one of the following methods:
    • 2.1a) The 27th pay cheque is for only the prorated amount. [26 normal pays + extra pay for the pro-rated amount]
    • 2.1b) Add the pro-rated amount to 27 equal pays. [ (Annual salary/27)+(pro-rated amount/27) ]
  • 2.2) Pay all all employees for the full amount regardless of whether they have worked the full 11 previous years. Some employers choose this option due to the complexity and/or time involved in pro-rating each employee individually. Other employers choose this option due to the perceived politics involved in not paying all employees an equal amount for the benefit.