How Leap Year Affects Payroll—and What HR Should Do

Leap year—in which an extra day is added to the month of February every four years—is sometimes considered a boon for offering people extra time and even luck.

But the extra day in February, stretching the month from 28 days to 29 days, can present challenges for organizations by adding a layer of complexity when it comes to payroll.

“Every four years, there’s an extra day of pay that can cause significant issues if businesses aren’t prepared,” said Jennifer Kraszewski, SHRM-SCP, senior executive vice president of human resources at Paycom. “Leap year means an extra day of wages, an extra pay period for weekly or biweekly employees, and an abundance of questions for HR teams and leadership, slowing down other business functions.”

How exactly does employee pay work in a leap year, and how can HR manage the interruption?

How Employees Are Paid

In short, how the extra day affects employee pay depends on the kind of employee and how their pay is usually determined.

Workers paid on an hourly basis are entitled to be paid for the hours they have worked, and, as such, they would receive payment for any hours worked on the additional Leap Day, explained Ruth Thomas, pay equity strategist at Payscale.

Employees who receive an annual salary would not be entitled to be paid for an extra day because this will have been factored into their salary. “In these cases, staff are usually paid one-twelfth of their annual salary each month regardless of the number of days in that month,” she said.

Realistically, for many employees, “not much changes because months are usually pretty variable anyway,” added Salary.com CHRO David?Turetsky.

Employees on biweekly pay schedules receive their checks every other week: 26 paydays in a normal year. Leap years, however, produce 27. This applies to hourly and salaried employees, Thomas said.

Employees paid semimonthly receive their checks twice a month on specific dates. They will always receive 24 paychecks per year, though a leap year might alter the exact payday in February, Thomas said. For example, if workers get paid on the 15th and the last day of each month, their last payday in February 2024 will fall on Thursday, Feb. 29—not Wednesday, Feb. 28.

Overall, Turetsky said, some employees might see a “little extra money in February, but payroll keeps moving on.”

One potential complication, Thomas said, is for employees covered by the Fair Labor Standards Act (FLSA). The law doesn’t specifically address leap years, but its minimum weekly salary requirement for exempt employees presents a potential hurdle: Dividing an exempt worker’s annual salary by 53 or 27 could cause their weekly salary to fall below the required state or federal threshold. Because the FLSA and comparable state laws—like those that set a higher minimum wage threshold—require you to pay employees for all hours worked, businesses should never skip that extra pay period, she explained.

“The simplest solution is to pay employees as usual and let them know that their annual salary increase is due to the leap year,” Thomas said. “Barring any raises, their annual salary will revert to the regular rate the following year.”

What HR Can Do

All this makes it important for employers to be cognizant of how a leap year can affect payroll. “Not planning for leap year is the biggest mistake,” Kraszewski said.?

Here are some things organizations—and HR leaders in particular—will want to do.

Inform employees about how their pay might be affected. First things first, Kraszewski said, it’s vital that employers communicate with employees about who will have an altered pay period so they know what to expect, why and when.

Budget for extra pay. Because leap year can mean an extra day of wages for some workers, employers will need to budget for that extra pay. “Depending on the size of the company, an extra pay period could mean a major shift in the budget,” Kraszewski said.

Be prepared for employees to ask questions. Although it’s always ideal for employees to take a look at their paychecks throughout the year, now would be a good time to remind employees to make sure their paychecks look correct, Turetsky said.

“Payroll mistakes happen,” he said. “This is an important topic, and people need to stay on top of it for themselves. And every HR department needs to stay on top of making sure that people understand their paycheck, that they understand the paystub and that they understand a lot of the allowances that come out of the paycheck.”

That being said, HR and payroll leaders should be prepared to handle more employee questions about their pay over the next few weeks given the differences in pay that may occur.

Look at your tech. Employers would benefit from ensuring their payroll software can handle a leap year accurately. They would also be wise, Kraszewski said, to make a habit of reviewing upcoming years so leap year doesn’t catch them by surprise.

Also, organizations should verify that they are compliant with payroll tax deductions for the additional pay period, she said. “Good HR tech can help employers stay up-to-date with the latest workplace laws and easily generate reports for audits or other annual compliance requirements.”

Consider the employee experience. One last thing, Kraszewski said: If an employee’s start date is Feb. 29, their anniversary will technically only be every four years.

Additionally, “If there is training scheduled that day, think about how it may affect certification renewals in the future,” she said. “It has a trickle-down effect, and if companies are not prepared for it, there could be repercussions.”