PROFESSIONAL DEVELOPMENT JULIA SHALLCRASS
Professional Development Spotlight Remedying Holidays Act Headaches
C
onfused about how to comply with the Holidays Act 1983? Find out how to overcome common compliance issues causing employers headaches. Many employers in New Zealand are confused about how to comply with the Holidays Act 1983 (the Holidays Act). Most businesses audited by the Labour Inspectorate have failed to properly calculate holiday entitlements. Even the Ministry of Business, Innovation and Employment was found to have underpaid staff holiday entitlements.
working irregular hours or receiving irregular pay are more likely to be paid incorrectly.
of two different calculations: ordinary weekly pay, or average weekly earnings.
Employers may struggle making correct Holidays Act payments for staff working variable hours, or receiving variable pay during the year, such as through annual bonuses, sales incentives and special rates.
Average weekly earnings is the total of an employee’s gross earnings over the last 52 weeks, divided by 52. This calculation includes the value of all allowances, overtime, penal rates, incentive payments, contractual bonuses and other regular payments earned in the period.
Issues relating to annual holiday entitlements include: the requirement to pay greater of two calculations; how to determine a working week; and how to manage changes to working hours.
Failure to comply with the Holidays Act can require penalties of up to $20,000, and remediation payments, with $66 million in arrears paid to date.
Paying greater of two different calculations
Why are there compliance issues?
The Holidays Act works best for employees who work regular hours, five days per week.
Employers may inadvertently underpay employees by failing to pay the higher of two separate calculations when an employee takes their annual holiday entitlement.
Since the workforce became more flexible, employers have struggled to comply with the Holidays Act. Staff
To calculate an employee’s entitlement to annual holidays, employers must pay the greater
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HUMAN RESOURCES
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Employers must take care not to just pay staff their usual pay when they take annual holidays.
Ordinary weekly pay looks at the earnings an employee would ordinarily receive if they had worked the week or period in question.
Determining a working week
While it’s easy enough to divide a week into a number of days for staff working Monday to Friday, many employees work irregular hours. It can be difficult to determine a working “week” for the purposes of calculating annual holiday entitlement for staff who work shift work, part time, and overtime. Staff working in hospitality, retail and health are more likely to work hours outside the standard working week.
