How does QB handle 27 pay periods in 2020 for salaried employees?

I's like to piggyback on this....

How does QB handle the TD1 claim amounts for 27 pays in 2020?  Will it automatically recognize there will be 27 pays in a year and adjust the claim amounts accordingly?  If QB does not adjust the claim amount, employees will be short-taxed in 2020 or the TD1 exemptions will have to be turned off for the 27th pay resulting in additional tax being deducted from the last pay of the year.

@ReymondO 

RE:  QuickBooks will automatically adjust its system by dividing the total salary among the 27 pay periods for next year, rather than 26.

No, it won't do that, which would be illegal.  See below:

@KJackson2020 

QuickBooks represents the salary as an annual salary, which is a bit of a disservice as that is not how salaries in the US work. A salaried employee is actually, legally, awarded a per-pay-period salary.  

Most professional HR departments understand this and when an employee gets a job offer they are told their per-period salary, like "Your weekly salary is $1000, or about $52,000 per year."  The key is the weekly salary amount, which should not change unless the employee has an HR event like a pay raise.  Or, for example the employee takes days off without pay.

The reason the salary in the above example is about $52,000 per year is that there are 52.1428 weeks in a year (52 weeks and 1 day), or 52.2857 weeks on leap years (52 weeks and 2 days).  So, the employee paid weekly usually gets 52 paychecks in a year, but works a bit longer.  Then, every seven years, there are 53 Fridays in the year and so the employee gets paid for 53 weeks of work and 'catches up'.

The same sort of thing happens if you pay every other week, as the pay periods are still based on the weekly cycle, which does not align with an annual cycle.

For example:

This table shows how many of each day of the week there are in each year and how many days there are in the year.  2020 is a leap year, so there are 366 days:

In 2020 if you issue a weekly payroll on Friday, there will be 52 pay days, but if your payday is on Wednesday or Thursday then there will be 53 pay days.  But there are still 52.285 weeks in the year. It just happens that Wed and Thurs are the first two days of the year and the last two days of the year as well!  (On normal years not there is one weekday a year with 53 occurrences and on leap years there are two days.)

If you want to ensure that there are the same number of pay days in the calendar year, the only way to do that is if your pay periods align with the year, such as twice per month or once per month (the latter isn't legal in many states. Check with your state.)

You don't want to change an employee's salary - which legally is a per-period salary - because there are more or less pay days in the year. 

There are the same number of work days and work periods each year (one extra day on leap years), but as it happens there are a different number of pay days if you pay on a schedule that is not exactly divisible by a year.

Hello again, Phoenix Custom Auto Designs,

I noticed you ended up posting this question to our Canadian QuickBooks Online community site as well. I've left you a response, which you can review here if you've not seen it yet: 27 pay periods in 2020

I want to make sure you have the appropriate information for the product you're using and the country it's for. Have a great rest of your day. :)

If our first payroll of 2021 is scheduled to be paid on 1/1/2021, will that be 27 payrolls in 2020 or 2021?  I would assume the payroll would be paid on 12/31/2020 creating 27 payrolls for salaried employees in 2020.  Is this how this will work?

Hey there, Clangner.

Thanks for joining the conversation here in the Community.

Your specific question would depend on the pay schedule. If the schedule is bi-weekly, then there will always be 27 paychecks per year.

Please feel free to comment below if you have any other questions.

I have read the question about the 27 payrolls and I am in the process of doing the first payroll for 2020 and Quickbooks is not automatically adjusting the salaried people to the 27 pays. Any suggestions? 

@bushuet 

RE: Quickbooks is not automatically adjusting the salaried people to the 27 pays.

That's right. It won't do that, which would be illegal and could get you into big trouble with your local labor board.  See my prior post in this thread.

@MorganB 

RE: If the schedule is bi-weekly, then there will always be 27 paychecks per year.

That is not correct.  There are usually 26 pay dates on a bi-weekly schedule, but sometimes there are 27, depending on where the days of the week land on the annual calendar.

Se my previous post for more details.

@Clangner 

RE: I would assume the payroll would be paid on 12/31/2020 creating 27 payrolls for salaried employees in 2020. Is this how this will work?

QB will record your paycheck as you direct it to on your pay dates. 

Since your pay dates (and pay periods) don't exactly line up to a calendar year, sometimes you will have 26 pay dates in a year and sometimes 27.  QB does nothing to compensate for this because there is nothing to compensate for.

See my prior post in this thread with far more detail.

Thanks I appreciate the quick response and feedback. The prior string was a little hard to follow and I did see where quickbooks was not able to do this. any suggestions on the best way to accomplish this in Quickbooks without manually entering salary amounts into payroll each time. I have the payroll setup on a bi-weekly schedule and pay day in Wednesday.

Any suggestions on how to accomplish this in quickbooks. I have payroll set as bi-weekly and would prefer to not manually enter the salary amounts by hand each time. I think you could force this by doing some math, just trying to see the best way. 

@BigRedConsulting I understand your point about salaries being weekly by agreement so I want to adjust the annual salary in QuickBooks to accommodate the 27 times that my employees will be paid this year.  QB does not have an option for weekly or bi-weekly salary.  QB does not divide by 27.  So do I just leave the annual salary the same in QB even though by the end of 2020 my employees will have an additional paycheck and therefore a higher salary in 2020?  I'm frustrated that I can't accurately represent the annual salary for 2020 without raising the biweekly paycheck.  

You don't want to do this. It is illegal.  If you reduce your employee's per-period salary without cause (or "just because") you are cutting their wages.

You would be asking them to work for 27 pay periods, for 54 weeks, for the same amount as they were making for 26 pay periods, for 52 weeks without any sort of reasonable reason.

And at the same time you likely won't be reducing your hourly employees' pay, right?

This will give your employees cause to open a case with your state labor board, which I'd encourage them to do if you did this - because they would easily win.

RE: So do I just leave the annual salary the same in QB even though by the end of 2020 my employees will have an additional paycheck and therefore a higher salary in 2020?

Yes, when you pay employees using a payroll cycle that is not divisible by a year, for example weekly or every other week, your payroll costs will vary from year to year even for employees on salary, just as they do from month to month (where some months have three pay dates.)

I think you're still attached to the idea that your employees make an annual salary.  But, in the US at least, there is no such legal thing as an annual salary.  Salaries are per pay period and should remain fixed unless there is an HR event like a raise.

Compare this to hourly employees.  Assuming an imaginary hourly employee who works exactly 40 hours a week, you will also pay them for an additional two weeks of work this year based on your pay dates.  Would you consider cutting their hourly rate to compensate? I hope not.

Regardless of the number of pay dates in a year, there are the same number of work days (with one additional day every four years on each leap year.)

I actually want to raise their annual salary in QB to represent what it will actually be with 27 pay periods.  So for $1000 per week or $2000 per paycheck, I want QB to show $54000 for salary not $52000. I'm not trying to cheat someone, I want to have accurate representation of earnings.   

I do understand what you are saying.  We've gone round and round as a company about this for months.  Our HR person and I have been trying to explain to department heads that legally they have to budget for higher annual salaries but the same weekly amounts.  Now I can't put them in QB as higher annual salaries so the budget numbers I send to department heads will look skewed.  

The bottom line: in order to run payroll, I leave annual salary the same in QBs.  In order to have an accurate budget amount, I raise the annual salary by one pay check.  

Thank you for your continued input on the subject. 

This did not happen, nothing changed when I ran the first payroll for 2020.

Why is QuickBooks saying it will automatically adjust?

Hi, OM55.

When an employee is set up as salaried, the total pay is divided based on their pay schedule. Hence, the salary amount is distributed by the number of pay periods in a year regardless if it's a leap year or not.

See this article for more details about the compensation types in QuickBooks: Payroll 101.

To set up a pay schedule, you can follow the steps below:

1. Click Employees at the top menu bar and choose Employee Center.
2. Go to the Payroll tab and select Pay Employees.
3. From the Payroll Schedules drop-down menu, select New.
4. Enter a name for the payroll schedule in the What do you want to name this payroll schedule? field.
5. Choose the pay frequency for the payroll schedule—Daily, Weekly, Biweekly, Semimonthly, Monthly, Quarterly, and Annually from the How often will you pay your employees on this schedule? drop-down.
6. Click OK.
   

You can get more information in the following articles below:

• Year-end checklist for QuickBooks Desktop Payroll.
• How will Federal banking holidays affect my direct deposit processing?

If you have other questions or need help with anything about QuickBooks, please leave them in the comment below. I'll be glad to get back and provide further assistance. Have a lovely week!

@FinanceDGHT 

RE: I actually want to raise their annual salary in QB to represent what it will actually be with 27 pay periods. So for $1000 per week or $2000 per paycheck, I want QB to show $54000 for salary not $52000. I'm not trying to cheat someone, I want to have accurate representation of earnings. 

I'm trying to get my head around this.  I think your goal is right (keep the per period wages the same) but that you are imagining an issue where there isn't one.

To keep the salaried employees' per-period wages the same in QuickBooks, do nothing.  This is because QuickBooks does nothing when there will be an unusual number of pay dates in a year, or a Month.  In turn, it does nothing because nothing is the right thing to do. :)

QuickBooks will correctly always divide the salary entered, dubbed an annual salary (even though there no such legal thing) by the same numbers, depending on the employee's pay schedule:

Daily: 365

Weekly: 52

Semi-weekly: 26

Semi-monthly: 24

Monthly: 12

Quarterly: 4

Annually: 1

RE: The bottom line: in order to run payroll, I leave annual salary the same in QBs. In order to have an accurate budget amount, I raise the annual salary by one pay check. 

Did you check your results?  When you do you will find that all of your period salaries went up.  I'm sure your employees will be happy, but perhaps not what you intended.

@OM55 

RE: This did not happen, nothing changed when I ran the first payroll for 2020. Why is QuickBooks saying it will automatically adjust?

Good! Nothing should change.  Salaried employees' per period salary should remain the same unless there is an HR event like a raise.

Agents here have stated that QB will adjust. I have no idea why they have said that, as QB has correctly never done any such thing.  That would be out of compliance with payroll rules and regulations.

If QuickBooks led users to do this, or did it automatically, they'd probably get sued repeatedly after QB customers repeatedly lost cases brought against them by employees who reported them to their state labor boards.

We have biweekly pay dates on Friday.  We would have a pay date on 1/1/21 but need to move to 12/31/20 since banks aren't open on 1/1/21 for direct deposit.  With this change, we will have 27 pay periods in 2020.  QuickBooks thinks we have 26 so is not dividing the annual salaries by 27.  Can this be fixed?  If not, I will need to manually adjust 2020 to 27 pay periods when QuickBooks thinks its 26 and then manually adjust to 26 pay periods in 2021 when QuickBooks thinks 27. Or does QuickBooks not make any adjustments at all?  I saw a few responses where it is not legal to change salaried amounts.  We have annual salaries not pay period salaries.

Hi there, fincoord,

Your payroll can be corrected so the last paycheck will fall in 2019. Since it was already done through direct deposit, we can void and recreate a manual check in the system.

To ensure that this is done correctly, I recommend contacting our QuickBooks Desktop Payroll Team. They have the necessary tool to correct your payroll.

Here's how to contact them:

1. Go to the Help menu, then select QuickBooks Desktop Help.
2. Click Contact Us.
   
3. Give a brief description of your issue, then select Continue.
4. We’ll provide you a few support options.
5. Select which one is best for you.

Also, the IRS only tracks when employees are paid, not the span of time when the money is earned. A common point of confusion is when work is performed in one tax period, but employees are paid in a different tax period. If the employer pays employees only on Fridays, you only report a tax liability on Fridays, even if employees earn wages every day of the week.

Don't hesitate to leave a comment below if there's anything else you need concerning payroll. 

2019 is not affected at all.  I am trying to plan for 2020, and possibly 2021.  I need to know if Quickbooks automatically adjusts each pay for 27 pay periods in one year.  If so, my issue is with the timing between 2020 and 2021. 

Thanks for getting back to us, @fincoord.

As my colleague MaryLandT suggested above, you'll want to get in touch with our QuickBooks Desktop (QBDT) Payroll Team. They have the tools to check you account securely and to ensure that the timing of the paycheck.

To contact them, you can refer to the steps provided by MaryLandT above.

You can also visit our Help articles page in case you need to learn some tips and tricks on managing your QBDT.

Let us know in the comment section below if you need further help managing your employees paycheck. We're always here to help.

@fincoord

RE: With this change, we will have 27 pay periods in 2020. QuickBooks thinks we have 26 so is not dividing the annual salaries by 27. Can this be fixed? 

No, because there is nothing to fix. This is normal and the way it is supposed to work.  If you pay every other week you will sometimes have one more pay date in a year than usual (once every five years or so), just as you may have three pay dates in a month once in awhile, when there are (for example) 5 Fridays in a month.

While there are the same number of pay periods in every year, when paying weekly or every other week, in most years you pay the employees slightly under what they work (since there are slightly more than 52 weeks in a year.)

Just as you would not pay your hourly employees less this year for the same amount of work (54 weeks of work), you shouldn't pay your salaried employees less per pay period.

See my prior posts on this thread for a more detailed explanation.