Leap year loophole: The potential costly effect for your organisation

Payroll loophole can mean employees work one day for free

Leap year loophole: The potential costly effect for your organisation

An employment law expert has warned major organisations across New Zealand about the potential costly impact of a loophole during leap years that leaves employees working an extra day without getting compensated.

Max Whitehead recently revealed that employees might be putting in an extra day of work without getting compensated during leap years, BNN reported.

This loophole stems from the oversight of not accounting for February 29 in most annual agreements, according to Whitehead.

He pointed out that despite contracts clearly outlining an annual salary, they typically fail to adjust for the additional day in a leap year.

This oversight means that employees effectively work for free on February 29, as their salaries remain unchanged despite the extra day of labour, according to the employment law expert in the report.

Loophole implications for employers

For employees, Whitehead said the impact of this loophole might be minimal.

But if they called out their employers over the extra day, the financial impact especially for larger organisations can be felt.

Whitehead pointed out that organisations such as the Auckland Council and the New Zealand Government, which employ thousands of full-time staff, might face significant costs if required to adjust salaries to accommodate the extra workday.

Whitehead told More FM's Jay-Jay and Flynny that he doesn't think employers are being deliberate in making their employees work for free during the extra day in leap years.

However, he also noted that major changes will unlikely be made to close this loophole.

"I think [employers] will stick with the loophole. If you think about it, it's minute money," he told Jay-Jay and Flynny.

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