McDonald's to pay back a decade's worth of miscalculated holiday pay

McDonald's has agreed to cough up a decade's worth of back pay to potentially tens of thousands of current and former employees.

Unite Union says it has struck a deal with the fast-food giant over miscalculated holiday pay that goes over and above what other low-wage employers have offered.

"This is a very significant step forward in fixing the mistakes that have been made around annual leave payments at a major New Zealand company - McDonald's - that's going to affect tens of thousands of workers," Unite national director Mike Treen told Newshub.

"I estimate probably around 60,000 people have worked for McDonald's over the 10-year period that is going to be covered by this mediation process," missing out on millions of dollars between them. 

A McDonald's spokesperson told Newshub they have "spent tens of thousands of hours working on what is a hugely complex project, in order to ensure the approach to making calculations is correct".

McDonald's will remediate staff back to November 1, 2009, while other companies - such as Pizza Hut owner Restaurant Brands - have only agreed to six years, Treen says.

"While we congratulate McDonald's for going back as far as they have, and other companies like Bunnings who have gone back even further, we are hugely disappointed that the Ministry of Business, Innovation and Employment (MBIE) has allowed companies like Restaurant Brands - who were alerted to the problem at the same time as McDonald's - to limit their liabilities to only six years. 

"Other companies like SkyCity have yet to commit to going back six years from the date Unite first wrote to them on either."

Mike Treen.
Mike Treen. Photo credit: The AM Show

Holiday pay is calculated on what would give employees the most money - their weekly pay at the start of the holiday, or their average weekly earnings over the past 12 months. But this can be difficult when dealing with flexible working arrangements.

Unite says Burger King and Armourguard have never been approached by MBIE and have not yet promised to pay back their staff.

Part of the problem, Treen says, is that "nearly every one" of New Zealand's top payroll providers got the law - which was adopted in 2003 - wrong. 

"McDonald's is not an exception in this regard. Nearly every company that's been audited by MBIE... has been found to be doing it wrong, and nearly every payroll provider."

MBIE itself got it wrong for a decade, and started remediating employees for six years' worth of miscalculations in 2014. 

"With the agreement in place we can now start the process of doing individual calculations," McDonald's told Newshub. "As other companies working on annual leave remediation have done, we will advertise when we have worked through the calculations and will have a website current and former employees can log into."

While applauding McDonald's for going back 10 years, Treen said rightfully any employees whose pay has been miscalculated since 2003 should get something back.

"I'd like to see the Government step up... and devise a solution that is able to be implemented easily," he told Newshub.

"Perhaps a system whereby smaller employers who can't afford to bring in Deloitte or EY and pay millions of dollars to accountancy firms to do a forensic analysis of their payroll... should be given a chance or a way of doing it in a more cost-effective way... Cheating workers of holiday pay is wage theft. It's time to pay it back."