Holidays Act changes possible

Employers across the country likely owe staff millions of dollars through unintentionally miscalculating annual leave payments. Photo: Lynn Grieveson

Changes to the Holidays Act are being considered by the Government to address large-scale payroll compliance issues.

Companies across both the public and private sector are facing the spectre of huge back pay bills because of complications in calculating holiday pay, mostly in industries where part-time and casual work is common.

Most recently Corrections became the latest Government department to signal it was facing a hefty bill, setting aside $16 million in the budget while it figures out the final total.

Police and the Ministry of Business, Innovation and Employment (MBIE) have also spent millions sorting out underpayment issues.

While in opposition Labour called for an inquiry into the problem, which was ruled out by National.

Since the change in Government, Business NZ and the Council of Trade Unions (CTU) have been together lobbying hard for changes to the Holidays Act, recently meeting with Workplace Relations Minister Iain Lees-Galloway.

Lees-Galloway declined an interview request, but in a short statement confirmed he was looking at options.

“I’ve had productive conversations with Business NZ and the CTU, and I’m actively considering what approach to take on the Holidays Act.”

Under the act, workers are entitled to four weeks’ holiday but many payroll systems operate in hours worked and struggle with calculations for staff who do not work a standard 40-hour week.

There were also complications about whether discretionary payments such as bonuses and commissions should be included when calculating holiday pay.

Richard Wagstaff, CTU national president, said he had been involved alongside BusinessNZ in a project MBIE had organised to try and address the problem.

The scale of it was huge and one of the main takeaways had been the difficult job those working in payroll had, he said.

“Trying to improve training and compliance and if you like the standard of payroll practitioners.

“One of the things that came out of that (project) was that people who work in the industry in large organisations haven’t had the status and value they deserve given the responsibility and complexity of the work.”

Wagstaff said he supported tripartite talks to change the Act and the sooner the better, as a six-year statute of limitations was in effect.

“I’m of the view that potentially thousands of workers will never get the money that they’re due. There’s a limitation on it, how far you can go back, and every day that goes past is a day you can’t claim back.”

His counterpart at BusinessNZ, chief executive Kirk Hope, said the organisation had been pushing hard alongside the CTU to amend the untidy Act.

Employers were doing their best to follow the rules but equally, employees deserved to be paid what they were owed.

Even if the act was amended the historic issues would still need to be dealt with and there were several options on the table to do so.

One was to stick with the reading of the current act, which would be problematic, Hope said.

Other possibilities included settlements negotiated between employer and employee and following guidelines set up by the labour inspectorate that allowed for “safe harbour” as long as businesses did the best they could to accurately estimate what was owed.

This could save on some of the huge compliance costs that were being faced by almost every organisation in sectors that employed people outside a standard work week, he said.

“You’ve even seen sophisticated businesses like government departments unable to comply, so that tells you how widespread it is.”