Holidays Act compliance – what to be checking for…

Today it was the Earthquake Commission’s turn to be in the headlines for needing to backpay more than 600 staff due to incorrect holidays and leave calculations.  This is just the case latest case of a workplaces uncovering issues with holiday pay.

The simplicity of the matter is that the majority of payroll software cannot cater to the complexities of the Holidays Act and the myriad of employment arrangements we now have in New Zealand.  When the legislation came into force in 2003 many workplaces operated set days and hours. 

The changes to working patterns and increase in variable hours and other contractual payments like bonuses mean that payments need to be checked and in some cases, manual overrides made. 

In our experience a number of payrolls are processed by administration staff who are reliant on the systems to do the calculations.  For many its only part of their role and not all have had Holidays Act training.   You may recall at this point MYOB being in the news in 2020 when it found problems with 7 of their payroll systems.  They are not the only system issues we have come across!

MBIE place the onus on the employer to get Holiday Pay correct.  The liability period is currently 6 years and if a Labour Inspector finds an employer in breach of minimum standards they could place that Employer on the Stand Down List preventing that Employer from supporting visa applications for migrant workers for a set period.     Then there is the cost of auditing and recalculating 6 years worth of holidays and leave!

The Government is due to release a new Holidays Act in 2023 for consultation.  What we know so far is that this new Act is likely to add complexity.  For this reason now is the time to be checking your processes so you have confidence in what is being done at this point and so you ready for the changes when they are decided. 

Some basic questions to check with payroll to decide if you need to take a closer look at your payroll records and processes are;

  • Are time and wage records for the last 7 years available for all staff including leavers and are they easy to access?
  • Can leave and earnings reports be easily exported from the payroll system into an excel format?
  • Are staff who work different times or days to what is in their employment agreement filling in timesheets for each pay period and are these being kept?
  • Are the number of days worked in a pay period being recorded in the payroll system for timesheet staff each payday for use in average daily pay calculations?
  • Do you have leave records for all contractual time not worked including unpaid leave?
  • Is the last 4 weeks average earnings being factored for staff working variable/seasonal hours when deciding ordinary weekly pay for annual holiday purposes?
  • Is payment for public holidays being checked everytime there is a public holiday with average daily pay being considered instead of relevant daily pay where it is not known what a person would have worked on that specific day?
  • Is the balance of ordinary pay also being paid to a staff member who worked part of a public holiday?  E.g. if they usually work 8 hours but on the public holiday only did 4 hours did they get 4 hours at time 1.5 and the other 4 hours at normal time?
  • Are all contractual earnings including overtime and bonuses being factored into average weekly earnings for annual holidays?

If the answer to any of these questions is ‘no’, ‘I don’t know’ or ‘I don’t understand’ or if you know there might be issues with your calculations get in touch with Mandy at Grow HR for further advice.