Is it possible to have two leap years back to back? For HR and payroll professionals, the answer is yes with two anomalous payroll years in a row. With 27 pay periods in 2015 and 366 days in 2016, employers should review their payroll and employment tax practices, and communicate with employees about any potential impact to their paychecks.
Most employers have already prepared for the extra pay period in 2015; however, some employees may have questions. While some employers will divide a salaried employeeâs yearly payment total by one extra period (for example: a workerâs typical salary would be divided between 27 bi-weekly payments as opposed to the usual 26), others may elect to pay their employees for an extra pay period at their regular rate of pay.1
An unchanged yearly payment stretched over an extra pay period will help keep payroll costs stable, but it means that employees will see lower payments each period than they may have expected. On the other hand, one extra paycheck at the usual rate is a plus for employees, but it also increases payroll totals on the year.
Just as HR professionals put the irregularity of the 2015 payroll year behind them, 2016 will bring a calendar leap year and yet another payroll quandary. Employers will need to make sure theyâre complying with any payroll tax implications of the unusual payroll year. With leap day falling on Monday, February 29, 2016, many salaried workers may wonder how their compensation will be affected and wonder if their employer will be getting an extra day of work for free. TODAY.com addressed this concern during the last leap year in 2012; it turns out the answer depends on your employerâs current payment practices.
A typical year has 52 weeks plus one day, but a leap year has 52 weeks plus two days. That extra day could mean another paycheck for employees if it falls on a designated payday in an employer'spayroll system.2 For businesses using accrual accounting systems, the extra day could be built in to the yearly total, and for hourly workers, it will mean an additional opportunity to log hours. Discussing how your business will account for the leap year with your workers can help reduce confusion.
Re-examine your current payroll structure and be ready to explain the implications of a leap year with any concerned employees and make sure your employment tax processing accounts for any changes your payroll team needs to make for the year ahead.
Tim Henderson is the Senior Director of Product Strategy for ADPâs Wage Payments product lines.
This article is being reposted with permission from ADP and previously appeared on the ADP Compliance Insights Blog.
[1] âPayroll âleap yearâ Will Boost Coffers for Workers,â http://www.reuters.com/article/2015/01/08/us-jobs-payroll-27thpaycheck-idUSKBN0KH1XI20150108
[2] âItâs Leap Day! You May Be Working for Free, http://www.today.com/money/its-leap-day-you-may-be-working-free-258439