How leap years affect pay and benefits

It’s a leap year, which means every worker gets an extra day to hit those February deadlines.

But what does that mean for pay and benefits? The answer depends in part on the rate and frequency with which workers are paid. For many workers, the leap year will signal a not-so giant leap for their paychecks.

As February 29 approaches, a quick primer for HR pros on how payroll and benefits are affected during 366-day years:

Workers paid on a weekly or hourly basis may see slightly higher pay. Salaried employees are unlikely to see their pay change during a leap year, as they are paid a portion of their annual salary each month regardless of the number of days worked. For most employees, “not much changes because months are usually pretty variable anyway,” David Turetsky, CHRO of Salary.com, told SHRM.

Hourly workers, however, will need to be paid for working an extra day in February. Employees paid on a weekly or biweekly basis may see an extra paycheck, costing employers slightly more in wages, according to a blog post from HR platform PeopleStrategy. Those paid on a monthly or semi-monthly basis will see the same number of paychecks, though their February payday may change slightly due to the leap year.

It’s worth noting that extra pay periods occur even on non-leap years, so this is something that’s likely on your HR department’s radar. In 2023, workers paid on a biweekly basis saw 27 pay periods as opposed to the typical 26.

Pay calculations may affect wage compliance. Employees who are exempted from overtime under the Federal Labor Standards Act (FLSA) are currently entitled to earn at least $684 a week. Many states have their own salary standards for exempt employees, and if their minimum wage threshold is higher then they generally supersede the FLSA rule.

Calculating wages during an extra pay period may cause worker pay to dip below this minimum wage threshold. If that is the case, employers should be sure to readjust wages so that they’re in compliance with state and federal standards.

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

Health plans, benefit deductions may be affected. It’s worth keeping an eye on how employee contributions toward benefits change during a leap year.

If an employee’s health plan deductions are calculated on a weekly or biweekly basis, for example, employers may need to block deductions during the extra pay period so as not to over-deduct, according to HRIS provider SentricHR. Wage payments such as child support, as well as income tax withholding calculations, may also be affected by additional pay periods.

Employees seeking to contribute the maximum amount to accounts such as a 401(k), health savings account (HSA), or flexible spending account (FSA) may also have to adjust how much they deduct from their paychecks to ensure they max out by the end of the year.