Making the Holidays Act 2003 workable for payroll – Open letter to the Minister of Workplace Relations and Safety – Hon Iain Lees-Galloway

Please note: the following letter has been sent to the Minister today we are hoping for a real opportunity to try and resolve the issues with this act, we will keep you fully informed of any developments. 


Dear Minister


The New Zealand Payroll Practitioners Association (NZPPA) was established in 2007 to develop and gain recognition for the important work payroll professionals do in ensuring employees are paid correctly and on time. Our aim is to continue to develop payroll as a recognised profession with the ongoing support of the industry and employers.

NZPPA is the largest payroll body in New Zealand and has grown to include over 1,100 individuals and companies as well as not-for-profit, corporate and overseas members. This membership is responsible for paying approximately 1,750,000 employees ranging from large companies to SMEs based throughout New Zealand (private and public sectors).

Within our membership, we have payroll practitioners that are sole-charge or manage a payroll team, provide external payroll processing for employers, are payroll application suppliers or are developers of those payroll applications.

As already stated, the focus of NZPPA is to develop and support payroll professionals. NZPPA does this through the development of skills and knowledge in the payroll profession. Part of this development is in the area of promoting compliance with legislation and encouraging payroll practitioners to question and not follow with blind faith payroll calculations included with payroll systems currently being used for paying employees in New Zealand.

NZPPA has no interest in what employees are paid. We are only interested in seeing legislation that is written in plain language, which can be easily applied to payroll without increasing the compliance costs in running an effective and efficient payroll.

Holidays Act 2003

In this letter we won’t be detailing all the issues with this Act as we believe there is enough evidence already available to prove that there are real issues that need to be addressed. Paying an employee any type of real any point of time should be as easy as paying their salary or wage, but this is not the case with the Holidays Act. One of the reasons for changing the legislation in the first place was to reduce compliance costs in administering the Act. But there is a substantial amount of evidence that the current Act has had the opposite effect and is now considered to be the number one compliance cost to payroll. We can provide examples of employers at all levels (public and private sectors) having to do multiple checks including manual workarounds in trying to be compliant. At the same time the Act provides areas where even with the best intentions, an employer and payroll can be found to have got the Act wrong. Your own Ministry is an example with issues being discovered two years ago that have still not been resolved. 

NZPPA receives questions and queries in regard to this Act every day and we have seen a large increase in requests for help since issues with the NZ Police and MBIE payrolls were made public. We know for a fact this is the tip of the iceberg in regard to the real issues and the substantial liability for leave in both the public and private sectors.

We want to be constructive and move forward with the Act and believe that a major rewrite will not happen in the current environment. We do, however, believe that smaller changes can make it workable for employers and will help payroll to pay employees correctly for leave entitlements while reducing the current substantial compliance costs.

NZPPA would like to put forward our proposed small changes to the Act which we believe will provide more certainty for payroll in paying employees correctly.


  1. Change the Act so that any time interval can be used if agreed between the parties e.g. weeks, days, hours or even a mixture if the parties agree and the time intervals can be reverted back to represent a week or a day for an employee. The employer and payroll would need to check that the payroll system can actually do this as presently the majority of payroll systems dictate the use of hours even when the Act makes reference to weeks and days.
  2.  Allow the parties to an employment agreement to define which payments are regular as this term is used in the Act but no definition has been provided.
  3. Allow discretionary payments (additional to an employee’s base rate above the minimum wage) to be excluded from gross earnings if the term discretionary has been included in the employee’s employment agreement and is agreed between the parties.
  4. Allow the parties to an employment agreement to set out how a week and a day for an employee that works variable hours is defined. This may be in the form of a rule, an average or whatever the parties have agreed to in good faith.
  5. If MBIE states that an employer is non-compliant with the Act, MBIE must first provide clear guidance on what the issues are and how the employer can resolve them. For instance, if MBIE has undertaken its own calculations on what an employee has been paid for leave, all of the calculations should be provided to the employer and payroll so it can be clearly seen how MBIE has come to its determination.
  6. Employers should have a 12-month window to amend existing individual employment agreements and for collective employment agreements when they are to be renegotiated on any changes agreed to be made in relation to 1 to 4.
  7. If the above changes (1 to 5) are implemented, all current issues with underpayments should be set aside except for blatant breaches of the Act that are not in relation to the above.

These seven changes do need to be fully examined and NZPPA accepts that they may not be accepted or adopted. The current Act, however, is not workable and needs practicable and simple changes that are in keeping with the original aims, while also enabling employers and payroll to meet their requirements more fully than at present.

Making MBIE more workable for employers and payroll

The new government has stated that it is considering changing the structure of MBIE. NZPPA would support this if it means any new structure will have as one of its primary roles leadership in providing real support and greater clarity to employers and payroll wanting to pay their employees correctly. 

The current “as per the Act” and “seek independent advice” stance of MBIE when an employer asks for help, support or clarification is totally unacceptable and has contributed to the ongoing issues with the Holidays Act. The bottom line is that if MBIE can threaten an employer with legal action and substantial fines if the issues with the Holidays Act are not resolved, they must know what has to be done to get it right. 

NZPPA would be happy to share numerous examples of MBIE’s lack of support and guidance if this will assist in the development of a new structure and culture that works with businesses and payroll so that we can pay employees correctly. 

A new government provides an opportunity for an open, honest and transparent dialogue as we are trying to achieve the same goals in paying all employees correctly.

NZPPA would like to meet with you to see how we can work together to resolve the important issues raised in this letter.

Thank you for your consideration and we look forward to hearing from you.


Yours faithfully


David Jenkins
Chief Executive Officer
New Zealand Payroll Practitioners Association

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