Auckland Council pay blunder could cost $18m to fix

Friday, 18 May 2018

Around 17,500 Auckland Council employees have been underpaid in an $18 million pay blunder.

The employees were underpaid as a result of an incorrect application of the Holidays Act.

This led to large-scale payment errors across several types of pay, including annual leave, sick leave, bereavement leave, public holidays, and alternative leave.

Director of people and performance Patricia Reade said the council was doing all it could to ensure the issue was rectified.

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'For Auckland Council, the issues are complex and affect approximately 17,500 current and past employees,' Reade said.

Affected employees include those who were employed from 2010, including a wide range and large number of contracts.

Auckland Council is the latest in a string of organisations across New Zealand incorrectly implementing the complex Holidays Act legislation.

'We are certainly not alone in discovering this issue with the Holidays Act,' she said.

'Working out exactly what we owed and who we owed it to was a huge and complex undertaking.

'However, we are committed to ensuring we do right by current and previous employees. The next step in the process will be to attempt to contact former employees who are owed backdated payments.'

In 2016, following an audit of compliance, Ernst & Young was contracted to perform a comprehensive review of the council's payroll system.

EY estimated liability of $18m.

This included detailed sampling and recalculating a wide range of employee payroll payments and applying this to the employee categories, determined by identifying employee working arrangements across the full population.

The liability and process were audited by Audit NZ during their audit of the 2017 Annual Report.

However, a council spokesman said the provision for this liability was conservative and based on thorough analysis and the completed modelling.

'The provision is an estimation because the council cannot know if all impacted past employees will claim their payments,' he said.

Work was underway to reconfigure the payroll system to address the compliance issues. Auckland Council estimated this will be completed late 2018.

The council will contact about 4500 current council employees to advise them of the issue and explain how pay will be rectified. Former employees will be contacted later this year.

Current employees affected will be paid during the week beginning May 21.