4. Tug of war begins over Holidays Act

Thousands of New Zealanders have been underpaid in holiday pay miscalculations. Photo: Lynn Grieveson

A task force to tackle a payroll mess has officially been announced, but whether employers and unions can come together to solve the problem remains to be seen. Shane Cowlishaw reports.*

Companies across the public and private sectors are facing huge back pay bills because of difficulties in calculating holiday pay through the outdated Holidays Act, mostly in industries where part-time and casual work is common.

The cost of remediating the underpayments is huge. A recent cabinet paper estimated the cost at between $292 million and $2.29 billion.

Both the CTU and BusinessNZ appeared side by side on Tuesday with Workplace Relations Minister Iain Lees-Galloway to announce the review in a show of solidarity.

The two organisations, often at odds, wrote a joint letter to the minister late last year calling for change.

That co-operation on the issue has never happened before and should be applauded.

But history has shown that disagreement between the two sides has been the main reason the potentially multi-billion problem has not already been addressed.

There is no way around the fact that some parties will be worse off if the act is to be simplified.

The problems are complicated but mainly revolve around the formula for figuring out holiday pay.

There are several ways to calculate holiday pay and an employee is entitled to whatever method results in the higher sum, which can be based on their ordinary weekly pay or on a 12-month average.

This gets confusing when employees work variable hours and one-off payments such as bonuses are included.

All sides agree that the act needs to be simplified. But doing this will almost certainly mean that at least some employees or employers will end up with reduced entitlements or higher bills, respectively.

It is this difficulty that led to former Workplace Relations Minister Michael Woodhouse abandoning changes to the act.

Lees-Galloway said the problem had been ignored for far too long and a complete overhaul of the legislation was needed.

He pointed to the CTU and BusinessNZ’s willingness to cooperate as proof a solution could be found.

The big question will be how much each side is willing to compromise. It could be business that has to take a financial hit to solve a problem which is becoming a major headache for many employers.

In his Cabinet paper, Lees-Galloway said he could not rule out that some employers or employees could be worse off as a result of any changes.

But when asked at the press conference if he would guarantee that no worker would lose their entitlements he said: “That’s a requirement, as far as I’m concerned”.

His office later confirmed that it was indeed a bottom line for the Minister.

It leaves law school professor Gordon Anderson, the chair of the task force, to manage a serious game of rope pull.

One scenario to ensure workers are no worse off could see an agreement reached that they have a lower, simpler entitlement to holiday pay but an increase in other areas such as public holiday rates to make up for it.

On the business side, an option is for employers to take a financial hit on the entitlement side in order to simplify the system and save money in compliance costs and costly backpay claims.

Richard Wagstaff of the CTU was unequivocal that workers would not be getting less in any deal: “I could imagine that but that’s certainly not what we’re there to do, we’re there to get a system where workers are paid at least as much and it is easier. That’s not our objective and we’ve agreed to come out of this with options so people aren’t worse off.”

His counterpart at BusinessNZ, John Milford , was not quite as sure: “Let’s see the outcome. We’ve got a lot of smart people we can pull together to come up with some solutions. If that’s the case, that’s a discussion for another day, not today.”

We’ll know who pulled the strongest in mid-2019 when the task force reports back.