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Law Educator, Esq., Attorney

Category: Employment Law

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Experience: 20+ Years of Employment Law Experience

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Is is legal company to reduce a payperiod by 4% due to a

Customer Question

Is is legal for a company to reduce a payperiod by 4% due to a payroll leap year. My company s claiming that due to a 27 pay period in 2016 they need to reduce our bi-weekly pay by 4% to make up for the extra pay period.

Hello and thank you for entrusting me to assist you. My name is ***** ***** I will do everything I can to answer your question.

First, your employer always has the ability to reduce your pay moving forward unless you have an express agreement guaranteeing a particular rate of pay for a set period of time. So, the question of whether our pay should be reduced in a 27 pay period year is legally irrelevant, since regardless of whether the math makes sense your employer could simply cut your pay. They don't need justification or reason.

But even if this were not the case, what you describe is legal and actually a rather standard practice. It is designed to address the fact that bi-weekly paychecks only cover 364 days in a year, not 365 (or 366 in Leap Years). Those extra one or two “unaccounted for” days add up to create an additional pay period every 11 years, and this can only be offset by a wage decrease to account for that additional payday.

I hope that you find this information helpful. Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes moving forward.

Patrick, I disagree with you about the 11 years. I am paid an annual salary in bi-weekly pay periods. That is 26 pay periods a year regardless of how many days are in that year. They don't pay extra for a leap year. Here is my argument. I start working on Jan 1st of 2002 at an annual salary of $26000.00 and am paid bi-weekly. The last pay period of the year covers up until Dec. 31st at midnight. The next year starts on January 1st and ends on December 31st at midnight. How can there be an extra pay period? A year is a year whether there are 365 or 366 days so there can never be a 27 pay period. A year is 26 weeks which equals 26 pay periods.

Customer:replied 11 months ago.

By my calculations if what you state is correct after 11 years they owe me an extra paycheck because they only paid me for 364 days not 365 or 366 on a leap year

First, as noted above, it doesn't matter whether the math actually supports what your employer is doing because they have the right to reduce your pay no matter what. But the math actually does support it.

The reason is this. If you multiply 26 x 14, you only get 364 days, not the 365 that are actually in a full year or the 366 that are in a leap year. So, your "annual" salary paid biweekly is actually giving you slightly more than a year's salary, it is giving you a full years salary for what amounts to one day less than a full year or two days less than a full year in a leap year. Every 11 years, this works out to one extra pay period, which if your employer did not offset for would result in you being paid more than your annual salary. The 4% reduction offsets for this.

"By my calculations if what you state is correct after 11 years they owe me an extra paycheck because they only paid me for 364 days not 365 or 366 on a leap year"

This is incorrect. I can see how it is confusing, but what is actually happening is that you are being paid an ANNUAL salary and your employer is just breaking it up into 26 biweekly payments. The salary is ANNUAL, meaning intended to cover you for the whole year, but yet in a biweekly system 26 pay periods only covers 364 days. So, you are actually getting paid for a full year in a span of time that is one day less than a year, hence the overpayment. This adds up over the course of years along with leap years and you get to a full pay period of overpayment, which this adjustment is designed to offset.

If you multiply 26 x 14, you only get 364 days, not the 365 that are actually in a full yearThis means I am giving them a free day because they are only paying me for 364 days.

No it doesn't. Your annual salary is intended to be your salary for the full year. A year is 365 days and yet being biweekly you get your full year's salary in 364 days. Hence you are being OVER paid, not under paid.

"Doesn't an annual salary cover the whole year? Isn't that what annual means? "

Yes, that is what it means, and it is precisely because that's what it means that your employer is logically justified in reducing your pay. Again, the salary is for the YEAR but you are getting it all in less than a year. More specifically by one day less than a year and two days less than a year in leap years. This adds up over time, and your employer is offsetting for it.

Let me give you a slightly easier example to follow. Let's say I agree to pay you $10 once a week. That should work out to $520 over the year because there are 52 weeks in a year. However, what if on 7 occasions I pay you a day early, and then make the next "weekly" payment one week from that day. This means you would have your $520 7 days before the end of the year. If I then kept paying you $10 a week, you would actually have gotten $530 over the course of the year. This is what happens overtime as a biweekly employee. That surplus of days builds up over the course of years leading to payment in an amount equal to one pay period more than your actual annual salary.

I really don't think I can explain it any other way. You will have to trust me that what I am explaining is correct, because it is. Here is another resource that may help explain it to you.

Sorry but you are confusing paychecks with pay periods. Just because you get your last paycheck in the next year doesn't mean that is a pay period for that yearJoe starts to work on January 1st of 2002 and his yearly salary is $26,000.00 paid to him bi-weekly.2002 The 1st pay period starts on January 1st and the last pay period is in the last week of December which includes all the dates until December 31st at midnight, Pay = $26,000.002003 The 1st pay period starts on January 1st and the last pay period ends in the last week of December which includes all the dates until December 31st at midnight, Pay = $26,000.002004 The 1st pay period starts on January 1st and the last pay period ends in the last week of December which includes all the dates until December 31st at midnight, Pay = $26,000.002005 The 1st pay period starts on January 1st the last pay period ends in the last week of December which includes all the dates until December 31st at midnight, Pay = $26,000.00You can run this out forever and there is never a 27 payperiod

You are correct there is not a 27 week pay period. That's not the issue. The issue is that since the bi weekly pay periods are always two weeks after the last one and there is one fewer day in a year than there are 26 pay periods and additional pay period "accumulates" from the extra days.

Did you review the resource I linked to? It is explaining the exact same thing I am. Your employer is explaining the same thing too. I can assure you we are not wrong.

Effectively, there is 1/14th of an extra pay period each year, and 1/7 of an extra pay period in leap years. Add those up and you get the full extra pay period. It's not all in one year, it's cumulative.

There can be an extra payperiod 26 weeks is 26 pay periods.I have read the article you showed me and it is not correctMy annual salary covers the entire year up until midnight December 31st so there can't be any additional days or parts of a day. It doesn't matter that the last paycheck I received actually comes in January. It should still be for the year before not the next year. The pay I receive for the 364th day cover the 365 day because it is still part of the same year.

I will agree they pay me for a day that hasn't come yet but that day is still part of the year. You can't go accumulating from year to year becasue that day is covered under that year.Did you look at my scenario? How do you get an extra pay period after 11 years?Again it doesn't matter when we get the check it is still part of the same year.

Customer:replied 11 months ago.

Here is a cut from the blog you pointed me to. This oddity occurs every 11 years. In short, it happens because 26 bi-weekly paychecks only cover 364 days in a year, not 365 (or 366 in Leap Years). Those extra one or two “unaccounted for” days add up to create an additional pay period every 11 years.The above statement is incorrect. the bi-weekly pay covers me for the whole year 365 days not 364 days because I am on an annual salary. My last pay period covers up to Midnight December 31st. The next year starts on January 1st.

Customer:replied 11 months ago.

Patrick, I am giving you an poor rating because you took the time to answer my questions. From what I see you read the blog and that was all. If you do a more aggressive google search and read some of the comments you will see there are a lot of people that agree with me. An annual salary covers a whole year regardless of how many days are in that year and when the last pay period ends or when you receive the paycheck for that last pay period. There are no extra days or part of a day to add up to an extra pay period. Just because I get an extra pay check in one year does not mean the pay is for that year, it is actually for the previous year. it is for the previous year

Customer:replied 11 months ago.

One other issue I have with this blog is that just because I am paid an annual salary does not mean I have to work 365 days a year. The work week is still considered to be Monday-Friday 8 hours per day. The benefit to the company is if work is required outside of these hours I work them.

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

I am a DIFFERENT CONTRIBUTOR, as your previous contributor has left and opted out of the question.

Your previous expert was correct in stating that employment in MA is deemed to be "at will" which means the employer may set the rate of pay and hours of performance as the employer deems fit as long as they provide advance notice to the employees. Furthermore, in MA, salary is set and determined by the employer, the employee does not have a "right" to a certain amount of pay beyond minimum wage. Thus, legally an employer may reduce the employee's pay to account for the leap year pay period.

As far as salary goes, the laws on salary employment were designed to benefit the EMPLOYER, not the employee. The US Department of Labor Wage and Hour Division and the MA Wage laws state that the salary employee may be required to work as many hours as the employer requires to complete their work and they are not entitled to any additional pay for doing so. Thus, even though you may work an extra day or work additional hours as a salary employee, the laws are set up to favor the employer on that, not you as an employee.

So, while you may be upset that the employer is reducing the pay to account for the leap year, it is not illegal for them to do so.