After the high-profile announcement last year that the Council of Trade Unions (CTU) and affiliated unions had identified a number of breaches of annual leave entitlements, a review was conducted by the Ministry of Business, Innovation and Employment (MBIE).
The unions had found evidence of significant systemic problems relating to payment for various types of holidays and leave (primarily annual holidays, but also payment for public holidays, alternative holidays, sick leave and bereavement leave).
The Ministry’s ensuing review agreed with the unions’ concerns and found that these breaches of the Holidays Act 2003 appear to be in fact significant and widespread.
NZALPA’s General Aviation (GA) organiser Tom Buckley is concerned that this could be a major issue not just for the GA sector but potentially for airlines. NZALPA is poised to follow up on discrepancies following any complaints.
NZALPA will also be seeking assurances, particularly from the airlines, that they have checked their compliance with the Act, the legislation that governs leave provisions.
In a recent communication, MBIE explained that they had found that the Act is being incorrectly implemented by employers and business owners.
The Act provides employees with minimum entitlements to annual holidays, public holidays, sick leave and bereavement leave, and specifies how the minimum payment for each type of leave is to be calculated.
The calculations require employers to accurately record a range of information about individual employee work patterns and employment terms and conditions. Payroll systems (manual and automated) are to be relatively intelligent and flexible in terms of which calculations/formulas to use when depending on an employee’s individual circumstances.
In recent years, it has become evident that some employers are not meeting the requirements of the Act and as a result leave payments are being miscalculated (and often understated). This is particularly so for employees who:
- Have fluctuations in the hours they work;
- Receive additional pay on top of their normal wages (e.g. bonuses or allowances).
The issues identified so far have included:
- Substandard payroll systems;
- Poor configuration of payroll systems;
- Poor use of payroll systems by payroll practitioners due to a generally insufficient understanding of the complexities involved in ensuring
- Undervaluation of the importance of payroll functions;
- Insufficient resources dedicated to compliance, including low demand for, and supply of, skilled payroll practitioners;
- Difficulties understanding the Holidays Act 2003.
COMMON ISSUES IN THE CALCULATION OF PAYMENT FOR LEAVE
Determining the payment rate applying to annual holidays
[Holidays Act 2003 s21]
Holiday pay must be the greater of ordinary weekly pay or average weekly earnings. If this is not compared it causes significant miscalculations, particularly where employees have worked variable hours, and/or their hours have included any additional pay.
The payroll system not recording, or not having a function to record paid days, for the purposes of complying with bereavement leave, alternative holidays, public holidays and sick leave requirements
[Holidays Act 2003 s81; s9, s9A]
Employers must keep holiday and leave records for all employees for not less than 6 years, including documenting the days the employee actually works if the information is relevant to the calculation of payment for entitlements.
Employers must use relevant daily pay or average daily pay to calculate bereavement leave, alternate holidays, public holidays and sick leave. If it is not possible or practical to calculate an employee’s relevant daily pay, or the employee’s daily pay varies in the pay period in question, an employer may use average daily pay. If an employer instead “guesses” the daily rate, it is possible that it will lead to relevant daily pay being incorrectly determined which is unlawful under the Act. Therefore, average daily pay should be used as the calculation.
Payroll systems not including regular (taxable) payments as part of the calculations for leave, for example, shift allowances
[Holidays Act 2003 s14]
Employers must include all regular taxable payments in the calculations of payments for leave. If the regular taxable allowances, productivity, incentive-based payments or commission are not included in the payment for leave, the employee will likely be underpaid for their leave.
Source: MBIE Update
Buckley said that any NZALPA member concerned about leave payment calculations for either themselves or others should seek advice from the Ministry or contact him at [email protected]
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