Many businesses incorrectly calculating leave, union claims

Wednesday, 9 March 2016

Businesses have to use the holiday pay calculation that gives staff more money.

Fast food, security and cinema staff are likely to be among the workers most affected by incorrect leave payments, it has been claimed.

It has been revealed the Ministry of Business, Innovation and Employment has not been calculating staff holiday pay correctly. Up to 3000 people could be affected and may be due a combined payout of millions of dollars.

Police have already paid $30 million to staff to correct similar underpayments.

Now, the Unite union says the problem is rife through the private sector as well, particularly among workers in security, cinemas and fast food.

What's the issue?

There are two ways holiday pay can be calculated – 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.

**READ MORE:

* Payroll blunder may be widespread

* Police forced to pay out $33m to staff after pay bungle**

But payroll systems are usually not easily adjustable for variations that can occur in staff pay over the year.

BusinessNZ and the NZ Payroll Practitioners Association want the Holiday Act reviewed because they say it is too complex and does not work with many employment situations.

BusinessNZ chief executive Kirk Hope urged businesses to check they were calculating leave correctly but said it was hard to predict how many might be affected.

'There is no doubt that the law is more complicated than it needs to be. Clearly the fact that there is potential or differences in the way the calculation happens and uncertainty, you could tidy it up and make it very clear about what people are required to do,' he said.

Lawyer Gareth Abdinor, of Taylor Shaw, agreed it was complex. 'The law is reasonably technical especially where it comes to workers whose hours vary a lot from week to week. You have to use formulas to calculate average daily pay and you need to know when you use one as opposed to the other and it does get quite complicated if you are not using it all the time. It's even got more complicated now with the Mondayisation of some of the public holidays.'

Staff short-changed

But the Unite union said it was more a case of businesses taking the easy way out.

'Underpayment of workers' holiday pay appears to be routine. Most major companies we deal with, including those in security, cinemas, and fast food appear to calculate their workers annual leave pay only as a certain number of hours,' national director Mike Treen said.

It is writing to fast food companies to ask for reassurance that calculations are being done properly.

'The hours of holiday leave that these companies calculate that they owe their workers is recorded on payslips. The workers then apply for and receive a certain number of hours when they take annual leave. But this method of calculation does not comply with the law and workers are being cheated out of their entitlements.'

Treen said it was easier and cheaper for companies to say they were paying a set number of hours leave but it was not correct.

'Workers who begin work in a fast food company will often be working more average hours at the end of the year before they take their leave. They 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.'

He said Unite challenged a security firm on the issue last year. They accepted they were wrong and $17,000 was paid back to 60 Unite members.

'We expected to have to go to court for a final resolution of this issue with the fast food giants. We are pleased that MBIE has acted and this may not be necessary.'

Software solutions

MYOB said businesses using its software should not be affected.

Spokesman Scott Gardiner said: 'Our products go through extensive quality and regulatory assurance testing to ensure they are compliant with any legislative changes. As long as customers are utilising the software correctly, they can be confident that our systems properly account for leave.

'The issues that have come to light in recent days regarding holiday entitlements show how complex the payroll area can be. They are a reminder that businesses should ensure their payroll solutions are up-to-date.'

Xero, another provider of payroll software, did not respond to a request for comment.

Public Service Association national secretary Glenn Barclay said it was not yet known how many MBIE staff were affected or how much each might be due.

'We believe MBIE isn't clear on those details yet. We will be meeting MBIE tomorrow and will raise this issue with them. We will work with MBIE on the process of reimbursing employees who've been affected. But we are concerned about the length of time that might take. A similar dispute involving immigration staff at NZ's international border, who are now part of MBIE, took two years to resolve. We would be greatly concerned if it took that long to pay our members what they are owed.'

Inland Revenue said it was not likely any other obligations, such as tax, had been incorrectly calculated.