An additional day is added to the calendar to align with the Earth's orbit around the sun once every four years. However, questions regarding its impact on pay have remained prominent.
Certain financial experts note an unforeseen pattern this leap year: employees inquiring about compensation for working on February 29.
Various factors come into play, such as the employee's pay frequency-whether it is weekly, biweekly, or monthly, and whether they are classified as salaried or hourly.
How Employees Are Paid
Salaried employees typically will not notice any change in their pay during a leap year since they receive a fixed amount each month regardless of the days worked. David Turetsky, CHRO of Salary.com, explained that the variation in monthly pay is already common for most employees, so the leap year does not affect much.
Ruth Thomas, a pay equity strategist at Payscale, clarified that hourly workers should receive payment for their hours, including those working on the extra Leap Day.
Employees with annual salaries would not receive additional pay for the extra day, as it is typically accounted for within their salary structure. In such instances, Thomas explained that employees usually receive a fixed portion of their annual salary each month, irrespective of the month's length.
Workers on biweekly pay schedules receive paychecks every two weeks, resulting in 26 paydays in a standard year. However, leap years yield 27 paydays, applicable to hourly and salaried employees.
Workers paid semi-monthly receive their paychecks twice a month on fixed dates. Thomas explained that they consistently receive 24 paychecks annually, although a leap year might affect the specific payday in February. If employees are paid on the 15th and the last day of each month, February 29 would be their final payday in February instead of Wednesday, February 28.
HR Calculations Based on Wage Compliance
Extra pay periods, like those in leap years, are also present in non-leap years, which is usually something HR departments are aware of. For instance, in 2023, employees paid biweekly had 27 pay periods instead of the usual 26.
Calculations of pay could impact wage compliance. According to the Federal Labor Standards Act (FLSA), employees exempt from overtime must earn a minimum of $684 per week. However, several states have their salary requirements for exempt workers. If their minimum wage threshold is higher, it typically overrides the FLSA regulation. During an additional pay period, wages might exceed the minimum wage requirement. Employers need to ensure wages are adjusted to meet state and federal standards.
Leap Year Implications to Watch Out For
According to a blog post by Paycom, the easiest approach is to pay employees usually and inform them that their annual salary increase accounts for the leap year. If there are no raises, their yearly salary will return to the usual rate the following year.
During a leap year, health plans and benefit deductions might be impacted. It is important to monitor any changes in employee contributions toward benefits.
Suppose an employee's health plan deductions are calculated weekly or biweekly. In that case, employers may need to halt deductions during the extra pay period to avoid over-deducting, as advised by HRIS provider SentricHR. Additional pay periods could impact wage payments like child support and income tax withholding calculations.
Employees aiming to reach the maximum contribution limit for accounts like a 401(k), health savings account (HSA), or flexible spending account (FSA) might need to modify their paycheck deductions to meet their annual contribution goal.
