Holiday pay botch up could hurt taxpayer


The holiday pay botch-up could end up hurting the taxpayer, with Finance Minister Bill English admitting to Newshub that big back-payments could damage Government department budgets.

The hospitality industry is one of the worst affected by the holiday pay botch up, which is why Photo Espresso owner Suzie McGoldrick is checking her payroll system.

She's far from alone, with 1700 other hospitality businesses contacting Hospitality NZ with holiday pay problems.

It's affecting all kinds of employers.  BP was one of the first to find around 300 employees underpaid. A spokesperson says it took two years to get it right.

And Mr English admits sorting out back pay for Government departments will cost the taxpayer.

"Police had to find $30 million to fund the back pay which means they couldn't fund their current wage increases themselves," he says.

It could also spread. The payroll system, AMS, which has had problems at the Ministry of Business, Innovation and Employment, also runs pay for several other big Government departments.

The taxpayer will get hit.

"It will have some impact - if it turns out they have large amounts," says Mr English.

The problem lies within the Holidays Act. It provides two ways to calculate holiday pay. One is based on ordinary weekly pay - earnings over last four weeks, divided by four.

The other involves average weekly pay - earnings over the last 52 weeks, divided by 52.

Employers should use the greater of the two-end figures.

It's complicated and gets even more complicated when people are working variable hours and employers have been getting it wrong.

Business New Zealand call for a law change and Labour is calling for an independent inquiry.

"The Government has continued to downplay this issue over a long period of time. It's clear it is in its interests to cover this up as much as possible," says David Clark, Labour's spokesperson for economic development and small business.

A law change will only fix the problem from here on in.  It's what has already happened that's the real problem and with thousands of employees affected, employers face big costs, not just in back pay but also in sorting the issues out.