For many employers, the first payroll check date of 2021 is scheduled to fall on January 1, a banking holiday. The question we are getting is, should we move the check date to either December 31, 2020 or January 4, 2021. For the most part, it is a business decision for each employer. Below are some things to consider when making that decision.
Paying employees on December 31, 2020, will cause an extra paycheck in 2020, which could affect benefit premiums, 401k contributions (especially if an employee has set up their contribution to meet the maximums), or any automatic payments employees have. It will also affect the budget for the year. This article sums up issues around having an extra payroll in a year.
Additionally, changing a pay date, even if for just one pay period, can have unintended consequences for employees. This checklist can help you think through some of those consequences, with the caveat that some information on the checklist is more applicable to a permanent change in the pay cycle.
Finally, there could be tax consequences for both employees and employers if you add a paycheck to 2020 and take a paycheck away from 2021. Please consult a CPA or tax attorney for guidance.