Holiday pay a 'nightmare' for businesses struggling with confusing law

Sunday, 1 April 2018

The NZ Payroll Practitioners Association says thousands of Kiwis are not receiving correct pay.

Thousands of part-time workers could be missing out on their annual leave entitlements because of a flawed process of calculating payments.

NZ Payroll Practitioners Association chief executive David Jenkins said the Holiday Pay Act was a 'nightmare' for business owners to calculate accurate pay for part-time employees working different hours and days each week.

There are two ways holiday pay can be calculated, either on the basis of ordinary weekly pay at the beginning of the holiday or the average weekly earnings over the previous 12 months. Employers must pay whatever gives the employee more money.

But Jenkins said this two step calculation employers were expected to make with every employee every time their hours changed threw them off.

* Many businesses incorrectly calculating leave, union claims

* Tens of thousands of Kiwi workers shortchanged in holiday pay botch-up**

He said employers who use systems that 'set and forget' payroll systems calculating it on the basis of what is in the employee's contract, for instance, as opposed to what they actually were earning, ended up not paying staff enough.

'There are over 90 different payroll systems in the country, and there is no national certification required. Some companies use payroll systems developed in other countries and apply it to New Zealand,' Jenkins said.

'It's no wonder that hundreds of thousands of workers are not being paid correctly.'

In 2016, about 3000 staff at the Ministry of Business, Innovation and Employment had been underpaid their holiday pay entitlement.

Unite Union's national director Mike Treen said many businesses, especially in the fast food industry were failing to pay their staff the greater pay of ordinary weekly and average weekly pay.

'Businesses are taking the easy way out because of the confusing law and are systematically underpaying workers,' Treen said.

Treen said he did not accept the calculation was complex or difficult to understand as the Ministry of Business, Innovation and Employment even provided a formula for calculating holiday pay on its website.

'Workers who begin work in a fast food company may start working 10 hours a week and finish the year working 30 hours a week. The average may be 20 hours a week but the holiday pay entitlement should be calculated at the 30 hours a week they are working in the month before they take their leave.'

'What is difficult is fixing the problem,' Treen said.

But Jenkins said the Government could step in and standardise how payroll systems calculate holiday pay, so all of them calculate pay by weeks of accrued holiday leave rather than hours and days.

* This story has been corrected to make it clear that Mike Treen did not support a change to the Holidays Act.

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