Does the leap year affect employee pay?

With the extra day coming up in February, many employers are wondering if they need to pay their staff more in a leap year.  The answer is not entirely clear cut, but failing to pay the correct amount could see the employer facing legal risk and fines.
 
Ultimately, it all depends on your pay structure;

• Employees paid hourly with a weekly pay reference won’t be affected by the leap day, as adding an extra day to February does not change a seven-day week to an eight-day week.

• Hourly workers who are paid monthly WILL see an increase in their pay as a result of the extra day because they will have worked for 21 days in February instead of the usual 20 days.  

• Employees on an annual salary are usually paid at 1/12 of their overall salary per month, regardless of the length of the month. The extra day in February in a leap year does not alter this analysis.

WATCH OUTS

Irrespective of any contractual terms, your organisation would need to ensure that employees are paid at least the relevant NMW/NLW rate of pay across all reference periods, encompassing the hours worked on the leap year day.

Employers with salaried workers who are paid at very close to minimum wage do need to take care to ensure that working extra leap hours does not tip their salaried workers below minimum wage rates. This would be a serious compliance issue and could result in an employer being named by HMRC as non-compliant over a relatively small and accidental oversight. 

Employers should also be mindful of how the extra day impacts on payroll. If you generally pay on the last day of the month, and this will result in employees being paid a day later than they might expect, this should be communicated to staff in good time to enable them to make financial arrangements.

Source: Personnel Today

If you need support with employee contracts and pay structures, please contact our team via hello@starfordlegalhr.com