How to Prepare for Leap Year Payroll in 2024

Ah, leap years. Just one extra day every four years can add an extra pay period to your payroll. Not to mention another layer of complexity that can:

• create payroll errors
• skew annual reporting
• spur preventable, last-minute corrections

Luckily, 2024 doesn’t have to be the year of the payroll problem. But getting ahead of possible issues means understanding how leap year payrolls work, and if it actually affects your operations at all.

What is leap year payroll?

While a leap year occurs every four years when February extends from 28 to 29 days, “leap year payroll” refers to the extra pay period that may result for employees paid weekly or biweekly. Though this might pivot HR operations for leap years like 2024, these periods are entirely predictable.

That’s because a year isn’t exactly 52 weeks. In fact, 365 days make up roughly 52.14 weeks — about 26.1 pay periods on a biweekly schedule. This means outside leap years, at least one day will occur 53 times instead of 52. To identify the extra day in standard years, just look at Jan. 1. In 2023, for example, Sunday holds this spot.

In a leap year, however, two days occur 53 times: Monday and Tuesday. In 2024, companies that pay their employees weekly or biweekly on these days will experience an extra pay period.

How do leap years impact different pay frequencies?

While not every pay schedule significantly changes in a leap year, all of them can be affected by an extra day. Here’s how a leap year adjusts the four most common pay frequencies.

Weekly

With a weekly pay schedule, employees receive their checks on a fixed day each week: 52 times in a standard year. In most cases, even a leap year won’t alter their pay date or period.

Now for the exception: If a year begins on a Thursday — or a Wednesday during a leap year — it will result in 53 full weeks instead of 52. In this case, employees who are paid weekly will have 53 paydays.

To determine the weekly gross pay for salaried employees you pay weekly on these years, use this formula:

annual salary/53 = weekly gross pay

Biweekly

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.

To calculate the biweekly gross pay of salaried employees during leap years, use this:

annual salary/27 = biweekly gross pay

Semimonthly

Employees paid semimonthly receive their checks twice a month on specific dates. But because payday falls on the same date each month and not the same weekday, the exact day you pay employees may change. Using August 2023 as an example, semimonthly employees paid on the 15th and 30th of each month received their checks on a Tuesday and Wednesday, respectively.

Although semimonthly employees will always receive 24 paychecks per year, a leap year might alter their exact payday in February. In 2024, if your people get paid on the 15th and last day of each month, their last payday in February will fall on Thursday, Feb. 29 — not Wednesday, Feb. 28.

Monthly

Workers on monthly pay schedules receive their checks — you guessed it — once per month. These employees usually get paid on the same day each month, so their paychecks aren’t significantly affected by a leap year.

However, if your payday lands on the last day of the month, that’s Feb. 29 in 2024.

How does leap year payroll affect compliance?

In leap years, payroll compliance hinges on 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.

By extension, that could cause an employee to lose their exemption status and trigger wage and hour violations related to:

• overtime
• meal breaks
• rest breaks

Since the FLSA and comparable state laws — like those that set a higher minimum wage requirement — require you to pay employees for all hours worked, businesses should never skip that extra pay period.

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

Remember, this extra pay period is subject to the same IRS requirements. To avoid fines and penalties while processing leap year payroll, continue to withhold taxes for:

• applicable local, state and federal rules
• Social Security
• Medicare
• any other law that affects your organization

How do businesses prepare for leap year payroll?

Leap year payroll might seem daunting, but the right strategy — supported by reliable HR tech — simplifies it. Keep these six steps in mind as you prepare to process payroll in 2024.

1. Inform employees

If you know any of your staff’s pay periods will be altered by the leap year — tell them!

Ideally, you should inform employees before the start of the new year and remind them again when it becomes most relevant. Self-service HR software is ideal for distributing this info, especially when the tech uses an easy-to-use mobile app.

2. Plan for the extra pay period

Prepare for how an additional pay period could affect your annual budget. Specifically, have funds available to cover an extra pay period. And don’t forget to process deductions as normal.

A benefits administration tool that exists in the same software as your payroll tech makes this easier to verify, since you can see the impact deductions have on employees’ wages in real time.

3. Check your payroll software

Ensure your payroll software can handle a leap year accurately. Plus, make a practice out of reviewing the upcoming year (or years) to keep leap year payroll top of mind.

If necessary, check your tech’s settings to ensure it accounts for the additional pay period and all relevant withholdings. If the leap year requires any changes, you may need to reset your software in the year that follows.

Using a payroll software that self-builds and automatically accounts for leap years takes the administrative burden off HR. And for extra peace of mind, employee-driven payroll gives your people an opportunity to resolve errors — like missing deductions — before submission.

4. Ensure compliance

Verify you withhold payroll taxes correctly for the additional pay period. And don’t forget about reporting, either. Adopt a government and compliance tool to help you easily generate relevant reports for an audit or an annual requirement — even on leap years.

For additional compliance concerns around leap year payroll, consult a licensed professional or tax adviser.

5. Maintain accurate records

You should always keep records of payroll expenses and tax withholdings. Ensuring you do it during leap years will help you avoid compliance gaps and missteps during a potential audit. Robust document management software helps you access relevant data whenever you need it.

6. Verify pay dates

Yes, having reliable tools at your disposal makes leap year payrolls less intimidating. But don’t forget to review the upcoming year’s pay periods yourself for added assurance.

If you have flexibility in how you adjust a pay date affected by a leap year, address it early and finalize your approach.

Explore Paycom’s single software to see how it simplifies work year-round — and on leap years, too.