Government takes bosses to court over holiday pay non-compliance

The Government is taking two employers to court over their failure to comply with holiday laws and has agreed deadlines with a further 64.

The move comes two years after widespread problems with compliance with the Holidays Act were revealed.

The issues centre around the fact that there are two ways to calculate holiday pay – either on the basis of ordinary weekly pay or an employee’s average weekly earnings over the past 12 months.

Employers must pay whatever gives the employee the most money.

But employers who calculate holiday pay based on an employee’s contracted hours can get caught out if that person does variable hours or earns a commission or other variable pay.

Stu Lumsden, labour inspectorate national manager for MBIE, said it had worked with 156 employers between July 2012 and September 2017 on Holiday Act non-compliance and all had a degree of non-compliance.

Of those 64 have entered into enforceable undertakings – a voluntary agreement between the employer and the inspectorate to address the breaches within a certain time frame.

Lumsden said employers who failed to comply with the agreed terms within the enforceable undertaking or an improvement notice may be taken to the Employment Relations Authority.

“To date, only two employers have been referred to the Employment Relations Authority, with the vast majority working together with the Inspectorate to remediate both current and former employees.”

An MBIE spokesman said it was not appropriate to name the employers as the cases were ongoing.

Those most at risk are businesses who have employees with fluctuations in the hours they work, or receive additional pay on top of their normal wages, such as for shift work or commission payments.

Last month Spark called for former staff to come forward and check if they were owed any holiday pay in public advertisements in newspapers around the country.

A Spark spokeswoman said the move was made in light of a recent review of its payroll situation.

“Spark has recently undertaken a thorough review of the Holidays Act – something we believe many other New Zealand employers – including several of the Government employing bodies – are also undertaking.

She said the act, with its complex calculations and different interpretations, had been sometimes challenging to comply with.

“Spark is not alone in this issue, and we have consulted with the Ministry of Business, Innovation and Employment [MBIE] to make sure we get our review and remedial action right.”

The company had resolved the issue with current employees and past employees which it had contact details for but was asking for any staff employed between January 2010 and March 2017 to come forward.

“We are now trying to resolve the payments for those past employees for whom we have outdated or no contact details – and we hope these advertisements we’ve placed will do the trick.”

Data from MBIE shows employers have already paid out $4.8 million to around 15,000 employees between July 2012 and September 2017.

Those payments averaged between $29 and $1300. On top of that the police have paid out around $39 million.

Others have yet to pay any money out.

A spokesman for McDonalds, which employs 9000 staff, said it was still working through the issue with MBIE and its external specialists.

“As with many companies, when questions were raised about how certain aspects of the Holidays Act 2003 were interpreted, we reviewed the processes and calculations used through our company-owned and franchised restaurants.

“Unite Union, who represent some of our employees, also raised the potential issue and we agreed to work with them in the review process.

The spokesman said the company had engaged a third party payroll expert to audit its payroll systems, and to review its calculations around annual leave payments.

“Having identified that we may have an issue we then had a project team work on rectifying the situation.”

The spokesman said it had committed to doing everything it could to pay whatever is owed to current and former employees.

“We are working to the best of our ability under the guidance of the Ministry of Business, Innovation and Employment to ensure the process followed provides a fair outcome for current and former employees.”

But the spokesman confirmed it had yet to pay out any money.

Russell Creedy, chief executive for Restaurant Brands, which employs around 3800 people across its KFC and Pizza Hut businesses confirmed it too was still working through the issue.


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