About 24,000 workers underpaid holiday pay, investigations show

Holiday pay debacle gets worse.

See also: Holidays Act a 'monster,' says payroll specialist

The holiday pay debacle has ramped up as more details emerge on how widespread the problem could be, from teachers to McDonalds workers.

The Ministry of Business’ Labour Inspectorate says investigations into Holidays Act breaches show about 24,000 private and public sector workers have been underpaid, ranging from $70 to $1800.  

The Labour Inspectorate says it has investigated 42 employers for payroll-related breaches of the act since 2012. Of those, 20 investigations have been completed. 

Government-owned Education Payroll – which took over the controversial Novopay system after teachers were underpaid, overpaid or not paid at all – is looking into whether teachers have also been affected by holiday pay blunders which have seen Ministry of Business and police employees underpaid millions of dollars.

Fast food giant McDonalds is another which is said to be investigating its systems.

Last month, current and former police staff were repaid about $30 million, stemming from errors almost seven years ago.

The State Services Commission is investigating how broad the problem is, as are Business NZ, the Council of Trade Unions and the Payroll Practitioners' Association.

This morning, Labour Economic Development spokesman David Clark called for a full inquiry into the problem.

“National has had six years to get to grips with the problem but still Steven Joyce isn’t doing enough. It now appears the payroll issues could be in businesses as big as McDonalds and effect thousands of workers. The payroll issue could be tens or hundreds of millions of dollars.”

Earlier this month, Economic Development Minister Steven Joyce said he was first advised in October last year that the ministry was establishing a payroll team to identify and address non-compliance and historical issues to do with holiday pay.  

Mr Joyce said during the 2012 merger of four government departments to create the ministry, a decision was made to also merge the four separate payrolls, including the former Department of Labour payroll, which had been used until about 2000.

“Unfortunately, from 2003 onward there had been no attempt within the government to ascertain that the payrolls were actually following the Holidays Act as it was laid down in 2003.”

The government set up a working group in 2010 to address any problems with the act, which was brought in by Labour.

It is thought the payroll miscalculations have arisen because holiday pay calculations can either be based on ordinary weekly pay at the beginning of the holiday or average weekly earnings over the previous 12 months. The legal obligation is to pay the higher amount capable of being calculated.

One-off events, such as bonus payments, can also lead to increased holiday pay entitlements. The Act says non-discretionary bonuses – where employees can expect a bonus if they meet pre-set criteria – are part of gross earnings and therefore included in holiday pay calculations, but discretionary bonuses are excluded.

Labour Inspectorate general manager George Mason says employers need to employers to record daily hours and extra payments into their payroll IT systems, especially where employees work fluctuating hours.

"The employer needs to make sure leave payment calculations are taking into account the fluctuations in the hours worked or pay received. They cannot just take a 'set and forget' approach to their payroll and expect to be compliant with the Holidays Act.”

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