HoliPay fiasco – 1 in 3 workers robbed

Written By: - Date published: 6:51 am, September 26th, 2016 - 48 comments
Categories: Steven Joyce, useless, wages - Tags: ,

Do you work irregular shifts (even only occasionally)?  Overtime?  Sometimes on Public Holidays?  An estimated 1 in 3 employees have some level of inconsistent hours, and if you’re one of them, then odds are you haven’t been paid enough holiday pay by your company.

1 in 3 would mean more than 700,000 workers are owed more than $2 billion – on average somewhere between $250 and $500 per year, as employers haven’t calculated holiday pay correctly.

It’s a problem stemming back to a 2009 law change by National, but you can only claim 6 years back before it’s lost – so workers are losing $1 million per day (bonus link: petition to stop the clock on those losses).  Just think what you could do with that $3000 – and how much you’d like that cash to be eroded by time and government inaction.

Most pay systems – all the large ones – didn’t bother correctly implementing National’s 2009 law, and the government didn’t bother following up on them, so holiday pay is under-calculated.  The problem’s so widespread that 1 small pay system’s point of difference is that it is legally compliant!

So most companies aren’t calculating it correctly, and if your hours aren’t constant, they’re probably underpaying you.

26,000 workers across 25 companies have got more than $35 million back so far & government ministries have also been scrabbling to fix up their workers – including Steven Joyce’s Ministry MoBIE, who are meant to be enforcing the law, but weren’t even applying it correctly to their own employees.  Will they now apply the law correctly for the rest of the country?  Or does having the Department of Labour looking after workers in the middle of a Business Ministry looking after their bosses not facilitate that?  It appears MoBIE have given up enforcing the holiday pay law in all but the most egregious cases.

Amongst those to have settled include NZ Post and the Police Force ($33 million), Bunnings, Silver Fern Farms and Datacom.  Those being investigated include Fonterra, Fairfax, Auckland Council, ANZ, BNZ, Restaurant Brands, Progressive Enterprises, Ryman Healthcare, and Warehouse (who’ve put $15 million aside to cover it).  Each time Steven Joyce says it’s an isolated incident – but it isn’t, it’s another pay fiasco on his watch.  Some of those affected by his Novopay fiasco are being hit again too.

Steven Joyce needs to stop the clock on eroding workers’ past entitlements, and needs to front up and explain why he’s let so many New Zealanders down – how he’s let $2 billion be lost by honest Kiwis.

48 comments on “HoliPay fiasco – 1 in 3 workers robbed ”

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  1. Bunji 1
    26 September 2016 at 10:34 am

    Actions to take:
    – sign the petition
    if you have any irregular hours / payments:
    – ask your union if they’re working with your employer about the issue.
    – if you don’t have a union: join one.
    – if you can, talk to your employer about whether they take any irregular payments into consideration for your holiday pay.

  2. Gareth 2
    26 September 2016 at 11:43 am

    Actions to take for employers:
    – Make sure you have purchased payroll software that is compliant with NZ legislation.
    – Make sure you keep the software up to date. Buy a support plan or whatever is needed because this area changes regularly.
    – Make sure your payroll staff (more than 1!) are trained, both in the software and also in the legislative requirements.
    – Make sure your payroll staff are booked in for training on updates and changes every year as part of their job.
    Payroll is not that hard as long as you know what you are doing. You leave yourself open for court cases and penalties if you don’t.

    • Lanthanide 2.1
      26 September 2016 at 12:34 pm

      And if you buy software that says it is compliant with NZ legislation, and it isn’t, you’re screwed anyway.

  3. Richard Rawshark 3
    26 September 2016 at 11:44 am

    So what happens when you have left the company.

    • Ben Clark 3.1
      26 September 2016 at 12:58 pm

      They would still owe you the money they should have paid you whenever you took holidays (and if they paid you out at the end, that might be wrong too).

  4. Lanthanide 4
    26 September 2016 at 12:29 pm

    Why doesn’t this article say what the actual problem with the 2009 law change was?

    Also I think this just shows that the law was too complex and unfit for purpose, and should be changed.

    • Ben Clark 4.1
      26 September 2016 at 12:57 pm

      It isn’t simple, but the reason it isn’t simple is to be fair to employees. Simplifying it totally screws workers (which National considered, but didn’t want to make too many people angry with them, when they were mainly trying to make the 4th week of holiday sell-able, so they just tinkered).

      Here’s the rules.

      Basically, if you take a day off you should get an average day’s pay. If you work 5 8-hour days, no problems. But what if you work overtime quite often? If I’d worked I may well have done 10 hours on that particular day, so why should I be penalised, when overtime is part of the money I need to pay the rent? I’d never take a day off…

      So get paid either your normal pay, or your average over the last 52 weeks, whichever is higher. If normal pay isn’t clear it’s the average over the last 4 weeks.

      • Lanthanide 4.1.1
        26 September 2016 at 1:08 pm

        Right, so the 2009 change was to go from relevant daily pay, only, to relevant daily pay OR average daily pay, whichever is the higher.

        I think the problem was the “whicher is the higher” part. I found the report written in 2009 saying that the point of the changes was to make compliance easier for employers. Having to calculate two formulas and pay the higher is not my idea of “easier compliance”.

        It should have been possible for employers to choose one method and apply that one only.

        • Ben Clark 4.1.1.1
          26 September 2016 at 3:07 pm

          It was already 2 ways before National tinkered with it (and indeed it’s almost 3 ways, as “normal pay” has 2 calculations – but you can chose which of those 2 are appropriate).
          And if an employer chooses which of the 2 ways, they’re often not going to choose the one that gives more to their employees (ie the one that’s actually fair to them).

          Essentially what you’re advocating is what’s actually happened here (just making it legal). Taking $250-$500 out of each of >700,000 workers’ pockets each year.

          • Lanthanide 4.1.1.1.1
            26 September 2016 at 5:03 pm

            “And if an employer chooses which of the 2 ways, they’re often not going to choose the one that gives more to their employees (ie the one that’s actually fair to them).”

            You can’t actually conclude which of the two methods will result in more pay to the employee. It depends on the situation. Sometimes, using annualised pay will result in more money for the employee, sometimes using the RDP will result in more money for the employee. The link you gave even gives to examples that have opposite outcomes, depending on the situation of the employee at the time.

            Yes, there will be some jobs where the variance between the two methods is always in the same direction, and so the employer will be able to minimise their costs in that case. But for many jobs, that won’t be true.

    • Pete George 4.2
      26 September 2016 at 8:25 pm

      Actually for workers with irregular pays and/or working patterns it is been confusing and in many situations difficult to work out fairly since the Holidays Act 2003 came into effect in 2004.

      What the national government did wrong was nothing – that is, when it was pointed out it was an ass of a situation they considered changes and then decided to not do much at all.

      The problems with calculations can work both ways. Employers can and sometimes obviously do calculate incorrectly, but it’s unfair to claim ” they’re often not going to choose the one that gives more to their employees (ie the one that’s actually fair to them)” – all employers I deal with try to do what is required and fair.

      One glaring anomaly is, when an Ordinary Weekly Pay can’t be determined (which means employees with irregular work patterns and pays) holiday is the greater of their last 12 month average or their last 4 week average.

      If an employee works say 8 hours a week through the year on average but works 48 hours a week for a month over Christmas, their 4 week average in the 4 weeks after that is abnormally inflated. That’s stupid.

      Prior to 2004 it was common to pay those on irregular work patterns 8% of their liable gross which was simple and fair enough, but that was virtually eliminated with the 2003 Act, and that has caused most of the grief.

      The aim of the act was to ensure employees got 3 weeks annual leave (later increased to 4 weeks) so it meant well, but has always been horrible in practice for those with very irregular work patterns.

      • Pete George 4.2.1
        26 September 2016 at 8:47 pm

        I should add that this way of calculating applies if holidays are paid while the employee remains in employment. If you are paid out holidays when you resign, only your due holidays are calculated this way, then that amount is added your liable gross earned since your holiday anniversary, and 8% of that total is added to the first amount calculated.

        Public holidays, sick leave, bereavement leave and time in lieu are calculated differently.

      • Ross 4.2.2
        27 September 2016 at 6:55 pm

        Pete

        It is not confusing or difficult to work out. The Holidays Act came into effect in 2003 so it’s been around a long time. I have no doubt most employers have been calculating holiday pay correctly. Indeed, if the heading is correct 2 out of 3 workers have been paid holiday pay correctly.

        Saying the Act is confusing is another way of saying you’re too lazy to read the legislation. For those employers who are too lazy to read the legislation, they can hire an accountant or lawyer, or simply call an employer organisation to help. There really are no excuses for not paying holiday pay correctly.

        Prior to 2004 it was common to pay those on irregular work patterns 8% of their liable gross which was simple and fair enough, but that was virtually eliminated with the 2003 Act, and that has caused most of the grief.

        That is incorrect. Those workers who are truly casual or who are on a fixed term agreement of less than 12 months can be paid holiday pay of 8% with their regular pay. It appears you haven’t looked at the Holidays Act.

        • Pete George 4.2.2.1
          27 September 2016 at 8:27 pm

          The Holidays Act 2003 came into effect on 1 April 2004.

          I’ve read the legislation numerous times, and debated parts of it many times.

          You and others here show a lack of knowledge of it, so it is still confusing some people.

          I’ve talked to many employers over the years who have had and still have difficulty with it.

          I’ve dealt with an employment lawyer who was recommending incorrectly to a major employer.

          I’ve had to explain holiday pay calculations to two auditors in the last month.

          It was common to pay 6% (which at the time equated to 3 weeks holiday) to employees who were part time and worked irregular hours.

          A combination of changes in the Holidays Act 2003 and determinations by the Department of Labour ruled out using the 6% calculation except in extreme cases.

          Are you aware how limited what you call “truly casual” is? It effectively rules out anyone who is rostered to work or has agreed to work in advance of that work taking place. “Truly casual” is limited to unplanned on-call work, I think it even rules out rostered on call work.

          • One Anonymous Bloke 4.2.2.1.1
            27 September 2016 at 8:41 pm

            In summation: you have less than zero expertise in this field, and are desperate for attention.

          • Ross 4.2.2.1.2
            28 September 2016 at 7:06 pm

            Are you aware how limited what you call “truly casual” is?

            Or, in other words, some employers are saying that full time or part time workers are casual…whose fault is that? Let’s be honest, some employers are too lazy to look at the legislation but will complain when they get hauled over the coals. They deserve zero sympathy. There are employer organisations that can help including the EMA, Business NZ, Hospitality NZ. Employers simply have to read the legislation and, if they don’t understand it, pick up the phone.

            The Holidays Act 2003 came into effect on 1 April 2004.

            So you agree it’s been around for ages and employers cannot plead ignorance of the law. Awesome.

  5. mosa 5
    26 September 2016 at 1:01 pm

    JOIN A UNION !!!! For $240 a year its a no brainer and gives you access to advice if you arent aware of how the different types of legislation affect your pay and conditions and gives you a chance along with other work mates to negotiate better pay and working conditions. I dont in my job fit the criteria mentioned in this very important post but i joined a union 6 months ago after twenty years of not being a member and my union rep has been fantastic in checking if i had not been paid the correct holiday pay and making sure i was receiving all my entitlements and keeping me informed about the progress of this years collective agreement.

    Mike treen the head of UNITE union has put up some very important posts on the Daily Blog regarding the holiday pay issue and other detrimental action affecting kiwi workers that does not make the MSM news and goes under the radar which suits Stephen Joyce and the employers just fine.

    This is another example of what happens when you weaken by law the effectiveness of an organisation that provides protection for not just vulnerable workers but the workforce as a whole and advocates for your rights and can interpret legislation or proposed new law and the possible dangers involved.

    Why should you NOT receive the money you have worked for and are entitled to because your employer has not made sure that you should and will fight not to have to pay you what is rightfully yours.
    If you work for a decent employer they will have acted and made the necessary software changes and pay what you have not received.

    Join a union today it pays to

  6. TC 6
    26 September 2016 at 1:41 pm

    The brighter future is working exactly as designed by nationals backers.

  7. Mike the Lefty 7
    26 September 2016 at 2:07 pm

    I wonder if some computer genius could set up a website (or even an app) where you could enter in details of gross earnings, holiday pay et, answer a few questions about your hours, and then calculate the holiday pay you should have got. Would be interesting to compare it to what you actually got.

    • Lanthanide 7.1
      26 September 2016 at 5:08 pm

      Not really worth the effort. There are so many different ways people can be paid for things, you’d need a big complex form to handle it all. Making it complex to cover all different cases, in turn makes it more difficult to use for any specific case.

      Then, people have to input the correct data into it -> garbage in, garbage out. You need payment records going back 52 weeks, you need to correctly input each bit of overtime you got, each allowance you were paid, etc.

      If you mess even one of those things up, the answer it will give you will be incorrect.

    • Pete George 7.2
      26 September 2016 at 8:30 pm

      You would need to put in all your liable earnings over the past 12 months for each pay period. Some allowances (reimbursement type) and some types of bonuses don’t apply, you need to know what to include and exclude.

      If your pay varies then your holiday pay can vary each period it is calculated in.

      It is easy to do in a spreadsheet so would be easy enough to do on a website.

    • Jan Rivers 7.3
      26 September 2016 at 8:59 pm

      To take this issue sideways a bit this points to a larger problem of service delivery by algorithm in both public and private sectors. Given that there is a holiday pay calculator on the Mobie? department website it appears that someone in government could have provided the code to describe what happened in payroll systems to pay holiday pay correctly to payroll providers where there was by and large an inability, incompetence or unwillingness to capture the intent of the legislation.

      Algorithms used for making decisions on the provisions or with-holding of services should be open for inspection. This should apply to both public and private service delivery.

      Code should be lodged with a government agency and a community agency fit for purpose – possibly fyi.org.nz, internet NZ or the open source society. The community agency should be funded to carry out this role. The code should be able to be run in a pilot system to demonstrate outcomes.

      Why this is important?

      The instances of use of algorithms to provide goods and services (and pay) exists already and can only grow. The following are examples:

      The government’s social investment approach is predicated on identifying people at risk because of their measurable profile. The flag referendum was the first time STV voting has been used in central government at an election time. Pharmac is looking at algorithms and profiling to optimise the delivery of medicines.

      Who is checking the quality of the code on these initiatives? They could easily be as problematic as the holiday pay issue.

      Without the opportunity to open the code our interactions with and services from public and private agencies are essentially becoming a black box.

      • Macro 7.3.1
        26 September 2016 at 9:58 pm

        Excellent points Jan!
        Perhaps the opposition parties should take this as part of a combined policy initiative. We would wait 7 years and a day for the current “administration” to do anything.

        • Macro 7.3.1.1
          26 September 2016 at 10:21 pm

          I see there is a holiday pay calculator on the IRD website.

          • Craig H 7.3.1.1.1
            28 September 2016 at 1:22 am

            I’ve seen at least one payroll expert’s opinion that the IRD calculator is wrong, but it’s there for tax calculations, not actual holiday pay calculations.

        • Jan Rivers 7.3.1.2
          26 September 2016 at 10:42 pm

          Thanks. 🙂 Yes. I think so. The whole issue of open government is ripe for a different set of approaches and it’s a useful entry point for the rest of the policy arena – from algorithms to work on a constitution to demanding real engagement between government and civil society to commitments to use evidence in policy making, initiatives to lessen the risk of corruption and to collecting meaningful data (non resident home ownership, poverty, environmental data sets, carbon intensity, waste management statistics) instead of just putting datasets into the public domain as inducements to writers of apps.

          • Macro 7.3.1.2.1
            26 September 2016 at 10:54 pm

            Speaking of Open Government …. Have you read this:
            Open Government: A dishonest assessment

            ……And reading the report, you can see why: there’s absolutely no acknowledgement of the very real issues with the action plan revealed by the Independent Reporting Mechanism and no recognition of the failures in developing and implementing it. There’s also ongoing confusion about what the OGP commitments actually are, particularly around the “Better Public Services” reporting and IT strategy refresh commitments. But I guess if they only reported against what they’d said in the published Action Plan, it would be a very short document indeed……

            • Jan Rivers 7.3.1.2.1.1
              27 September 2016 at 8:55 pm

              Yes. Thanks. Idiot/Savant has been a solid and reliable reporter on these issues for several years and follows the twists and turns.

              Publishing the independent reviewers (critical) report of the NZ OGP in NZ is i understand a requirement of the OGP membership and hasn’t happened but Steven Price (the independent reviewer’s) articles are illuminating.
              http://www.medialawjournal.co.nz/

              I’m picking that some of these open government issues could become lightning rods for what a people centred politics could deliver.

  8. Naki man 8
    26 September 2016 at 3:26 pm

    “JOIN A UNION !!!! For $240 a year its a no brainer”

    How about people who are paying more than twice that in union fees when the union has $millions in the bank, is that still a no brainer?

    • Bunji 8.1
      26 September 2016 at 4:51 pm

      Can you name this mystical NZ union that is ripping its members off? Or more likely just making shit up?

      I’m not sure how well resourced any NZ unions are, but they need something in the bank for when they’re supporting workers on strike/lockout / other campaigns.

      • Naki man 8.1.1
        26 September 2016 at 5:14 pm

        Bunji
        Are you saying that a union that deducts more than $480 per year from a large proportion of its members is ripping them off??

        What if they have more, from memory than 3$million in the bank,
        would that be ok with you?

        • Lanthanide 8.1.1.1
          26 September 2016 at 8:56 pm

          No, Bunji didn’t say that at all.

          Bunji asked you to put up, or shut up. I notice you’ve done neither.

          • Naki man 8.1.1.1.1
            26 September 2016 at 9:19 pm

            NZDWU

            • mac1 8.1.1.1.1.1
              27 September 2016 at 7:09 pm

              Naki Man. Some more horrendous union fees……….
              Federated Farmers fees 2015:
              Business Owner/Director $635.00
              Farm Manager,Rural Contractor, Farmlet , Rural Services $445
              Farm Employee, Supporter $127.00

  9. Little Kiwi 9
    26 September 2016 at 4:47 pm

    Joining a union isn’t helpful unless you work for a company they represent, such as a supermarket. I didn’t get any holiday pay or sick pay in a job I did for a small business for 1.5 years. I didn’t dob them in because I would have to deal with the backlash, given they only employ 1 or two staff and they would know it was me. The IRD should know this stuff anyway, given the company was always late with tax and paying me so infrequently. Interestingly they always got out of the late fines. I was in the office every time the IRD called, which was often. All they had to do is find out if they had staff employment agreements (which they didn’t do), but they trust in this ridiculous “good faith” thing that employers are supposed to be naturally endowed with.

    The next employer made us sign away our right to sick pay legally in the agreement. In addition to that we had to sign an IP agreement preventing me from working in a competitive area and taking full ownership of my copyright in future work. Most of us got sacked during the trial period so the only reason I was hired was to prevent me using my skills in a competitive business! Totally illegal in Australia to do this but it seems anything goes here. If the govt cared about this it would be really easy to collect and monitor employment agreements with our tax. There may be some IT involved but the returns would more than pay for it.

    Mike the Lefty, there is a holiday pay calculator on the IRD website. There are plenty of computer geniuses working there. I know how much holiday pay I didn’t get but that doesn’t help me. Even labour inspectors don’t feel safe dealing with some employers.

    The IRD are making it easier to go self employed with all the calculators and things they have online now, thank goodness.

    http://www.ird.govt.nz/calculators/tool-name/tools-h/calculator-paye-holiday-pay-2016.html?id=righttabs

    • Lanthanide 9.1
      26 September 2016 at 5:11 pm

      “The next employer made us sign away our right to sick pay legally in the agreement.”

      This is not legally possible in NZ.

      “In addition to that we had to sign an IP agreement preventing me from working in a competitive area and taking full ownership of my copyright in future work.”

      Fairly standard provision. However work that you do in the future, that doesn’t build on top of work you did for the employer, cannot be impacted by such a clause.

      “Most of us got sacked during the trial period so the only reason I was hired was to prevent me using my skills in a competitive business!”

      I believe that restraint of trade clauses generally aren’t enforceable if the employee is terminated. [Edit: have done some quick googling, if you’re terminated during a trial period, then you can likely argue your way out of a clause, but if you’d been employed somewhere for 6+ months, then it’d likely still apply even when terminated]. They definitely apply if the employee resigns. Unsure how it works for redundancy.

      • Craig H 9.1.1
        26 September 2016 at 7:11 pm

        Restraint of Trade is typically only enforceable if the remuneration includes payment for it, so if the remuneration does not include a specified payment for it (and they can’t just say it in the contract that the remuneration includes it, it actually has to be extra), the employer will struggle. NZ Courts have generally held that people have a common law right to work, so any abrogation of that right must be fairly compensated or it’s not enforceable, and they uphold that quite strictly.

        • Lanthanide 9.1.1.1
          26 September 2016 at 8:04 pm

          Actually I’ve done a lot of research into this topic recently for a family member.

          The courts have held, that if the original employment contract has a restraint of trade clause in it, then taking up the employment itself is considered due consideration for the clause. Employees can “negotiate” with the employer on the conditions of the contract (in other words, it’s “take it or leave it”).

          It is only if the clause is added to a contract later, that specific consideration needs to be offered along side the added clause. Even then, it’s unclear whether a pay rise + a restraint of trade clause added at the same time, without being explicitly singled out as consideration for the restraint of trade, would be struck down by the court. There doesn’t appear to be any case law on that specific point.

  10. Little Kiwi 10
    26 September 2016 at 7:25 pm

    Thanks for the advice Lanthanide and Craig. Since we only had the weekend to look at the contract, none of us had time to get legal advice. The owner seemed really decent, but character declined after we signed the contracts. We were threatened with legal action throughout the trial which is something I haven’t experienced working in NZ. The contract also had rotating probation in it after the trial period so there was never job security although I did sign after starting work. We were ultimately terminated with a phone call so there’s no trace of it. I found out when I wasn’t booked into a shift and rang up about it.

    • Lanthanide 10.1
      26 September 2016 at 8:09 pm

      “Since we only had the weekend to look at the contract, none of us had time to get legal advice.”

      That’s also not really legal in NZ. Standard practice is 5 business days, precisely so you can seek legal advice.

      “We were ultimately terminated with a phone call so there’s no trace of it.”

      Under the 90 days provision, you’re allowed to request the termination and reason for termination in writing.

      “so there was never job security although I did sign after starting work.”

      In which case the 90 day clause doesn’t apply and your dismissal was likely unjustified.

      Did the contract you signed even have a 90 days clause?

  11. Little Kiwi 11
    26 September 2016 at 8:25 pm

    Hi Lanthanide,
    It did have a 90 day clause. The reason for the termination was that they couldn’t afford to keep on so many staff so we were sacked at the same time. I am pretty sure it was one of those trials where they never needed more than a couple of staff and wanted to prevent everyone with our skills from running a competitive business. My only concern is that this employer likes to sue people for exposure, and claims to own my copyright in any creative work unrelated to the job as stated in the contract. This effectively prevents me from working as a sole trader, although I don’t know how successful they would be in taking ownership of a completely different business with no competitive threat. It could be a grey area.

    • Lanthanide 11.1
      26 September 2016 at 8:55 pm

      “wanted to prevent everyone with our skills from running a competitive business. ”

      Restraint of trade clauses can only protect the employer’s legitimate proprietary interests. For example if you’ve worked with particular customers for the employer, when you start your own company or take employment elsewhere, you can’t induce those customers to follow you.

      “This effectively prevents me from working as a sole trader, although I don’t know how successful they would be in taking ownership of a completely different business with no competitive threat. It could be a grey area.”

      They wouldn’t be successful. Restraints of trade clauses need to be of reasonable length; anything over 12 months is generally considered to be unreasonable. Of course, I’m not a lawyer, so should you want to be a sole trader, you should get legal advice on this point. I expect it’d only cost you 1 hour of a lawyer’s time to get an answer, though.

  12. Little Kiwi 12
    26 September 2016 at 9:45 pm

    Thanks Lanthanide,
    It probably isn’t worth worrying about because I don’t have any of their customer contacts and won’t be doing anything similar. Fortunately I never went along with their Facebook promo but I am still reluctant to use my own name given the whole copyright thing is a bit grey. Their new business branch is failing as it turns out. One of the chosen staff left voluntarily. A warning to others not to sign any restrictive IP agreements under 90 day trial, or to sign a 90 day trial contract with a new business which will always hire more staff than needed and create a battle between staff. Much wiser to go for a job with an established business with a good reputation.

  13. Craig H 13
    26 September 2016 at 9:55 pm

    Having looked at the current and previous incarnations of the Holidays Act, the problems do not stem back to 2009 as there was no change to Holidays Act in 2009 – the Holidays Amendment Act 2010 received the Royal Assent in November 2010 and took effect from 01/04/2011 – the Act was not updated at all in 2009.

    The 2010 amendment added a section and name of Average Daily Pay (section 9A of the Holidays Act) by splitting it from the definition of Relevant Daily Pay (section 9 of the Holidays Act). This part of the Holidays Act previously defined Average Daily Pay as part of Relevant Daily Pay, it just didn’t call it Average Daily Pay (ADP). A change however is that previously the Act required ADP be calculated over the past 4 weeks, where the update changed it to the last 52 weeks.

    However, my understanding is that the main issue is caused by a misinterpretation of Ordinarily Weekly Pay, which is applied to annual leave, rather than RDP/ADP, which are applied to public holidays and sick/bereavement leave. Ordinarily Weekly Pay is the greater of average weekly pay over the past 52 weeks, or whatever the employee would normally earn. However, many payroll systems have not been calculating both and then working out the higher, and paying that. There is also the issue of what is included in these calculations, as the Holidays Act includes productivity or incentive-based payments (including commission) if those payments are a regular part of the employee’s pay and payments for overtime if those payments are a regular part of the employee’s pay.

    Interestingly, the Holidays Act 1981 also calculates holiday pay for annual leave as being the higher of average weekly earnings or ordinary pay (it words it slightly differently, but the effect is the same).

    • Pete George 13.1
      27 September 2016 at 6:02 am

      Most of the problems date back to 2004, when the Holidays Act 2003 came into effect.

      “Ordinarily Weekly Pay is the greater of average weekly pay over the past 52 weeks, or whatever the employee would normally earn. ”

      There is more to it than that. Many of the problems arise when you can’t determine what an employee would normal earn (Ordinary Weekly Pay) due to their irregular work patterns, in which case you need to calculate the last 4 week average and use the greater of that or the 12 month average.

      When an employee has different work patterns through the year the 4 week average can be ridiculous.

      There are also problems with regular work patters that change. If an employee works 1 day a week for a year and accrues 4 weeks annual leave, then switches to 5 days a week, and then wants to take holidays, should they be paid at a 1 day a week rate or a 5 day a week rate?

      What changed in 2009 was the introduction of an agreed rate, where the employee and employer can agree on a holiday pay rate.

      • Craig H 13.1.1
        28 September 2016 at 2:20 am

        Having read the Holidays Act 2003 in all its incarnations, and having checked legislation.govt.nz, there was no change in 2009 – there was a change in 2008 and in 2010 (some of which took effect in 2011), but nothing in 2009.

        Also, not sure how National changed it so that there could be an agreed holiday pay rate – the Act as enacted in 2003 had provision in section 8 for the employer and employee to agree on another calculation in the employment agreement provided it was equal to or greater than the calculations in the Act. That hasn’t changed since.

        Correct me if I’m wrong, but the relevant sections are 8, 10, 14, 17 and 21-26, with 8 and 21/22 being the main ones for calculation purposes. Very little has changed in any of those sections since enactment other than as required by the introduction of Kiwisaver and 4 weeks annual holidays. If you could cite the specific section that changed and when (and it wasn’t 2009), that would be handy.

        Agreed that having to use the average of the last 4 weeks is an issue, but only if you can’t work out the normal pattern of work per the employment agreement. If the issue is ever-fluctuating rosters, then I can’t say I have much sympathy for employers in those situations – perhaps they should look at their M.O. if it causes them that much grief, or accept that that’s the cost of that model, because many of the employees don’t get much out of it.

        Looking at legislation, annual holidays have been paid at the higher of average weekly pay and ordinary weekly pay since 1974, which is also when the annual holiday allowance was increased to 3 weeks (thanks Labour!), so perhaps that’s settled law to some extent by now, given that aspect has not changed since then.

  14. Peter Edmunds 14
    27 September 2016 at 11:29 am

    Over many years, I’ve experienced the vagaries of this sloppy, ill-defined legislation, both as an employee with wildly varying hours and allowances, and in attempting to implement the legislation in payroll code.

    The corollarium is that the legislation has consistently been framed in terms of regular, weekly, full time work with any variation from this viewed as an edge case, which is patched up as an exception.

    In other words, the legislation is the point of view of a salaried employee with well additional defined benefits.

    The reality for an ever increasing number of New Zealanders is very far removed from this idea.

    There is only one conclusion that I’ve reached.

    The legislation, and the associated mindset of employers, is in dire need of a complete, and consistent overhaul based on the one premise that pay and any additional allowances, of which holidays are the primary consideration, needs to be based on a 24 hour period.

    It would take me days of writing to delineate this idea in full, suffice to say, when the complexity of the exceptions exceed the original implementation, then the original implementation was inadequately normalised.

    Or simply put, someone got it wrong.

    Working on a well defined, rolling 24 hour period, can be written down on the back of an envelope by a small business with one part time employee and scaled with relative ease to a large business with considerable IT investment.

    The exceptions have become the norm. If attempting to fix a problem results in a new problem, and attempting to fix the new problem results in another new problem, you are by definition falling into the trap of stupidity by expecting a different result while continuing to do the same thing.