Expert: Shirley McAllister, CPP, PHR - 6/16/2011

Question
My question is.  We've just changed to 26 pay periods.  We've ask if on the month with 3 checks would the 3 check be less medical deductions and 401k loan payments.  They have been unable to answer this question.  I believe that would be the case, because those deductions originally have been figured out with 2 payments per month in mind.

Thank you

Answer
The payroll can be set up to do either 24 or 26 deductions a year. If part of the year has passed it might be a good idea to do it that way for the rest of the year. Otherwise you have to figure out what has been taken out, what is left to be taken out and divide it by the remaining pay periods.

Either way you divide the amount of annual payment by either 24 or 26 pay periods. We originally did 24 when we changed from 24 to 26 pay periods. We changed it to 26 because it was easier and because it was less each pay period for the employees and they preferred that.

So if the medical deduction is 50.00 twice a month that is 50.00 x 24 or 1200.00 a year. So if you use the 26 pay period method you would divide 1200 by 26 and each payday you would only withhold 46.16 instead of 50.00.

Shirley