The Health Minister is promising more than 100,000 nurses, doctors and other health workers half a billion dollars putting right a decade's worth of underpayments.
Dr David Clark said district health boards (DHBs) have found that around $550-$650 million is owed to DHB staff to comply with the Holidays Act 2003 over mistakes made since 2010 in leave and shift allowance pay.
It follows an agreement by Cabinet in May last year to establish the Holidays Act Taskforce instructed to carry out a full review of the Act, which has been criticised as unmanageable.
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The Act outlines the minimum holiday entitlements for staff in New Zealand and says accurate records must be kept for all employees of hours worked and the pay for those hours.
"We have instructed DHBs to work with unions to resolve this issue and ensure workers are fairly recompensed," Dr Clark said on Tuesday.
"I can assure our health staff that resolving these historic pay issues is a priority for DHBs working alongside unions. Our doctors, nurses, allied health workers and other staff deserve no less."
But Dr Clark said DHB staff could have to wait up to two years for the Government to review and rectify this historic issue.
"This is a complex and time-intensive task. By its very nature, health work is a 24/7 proposition," the Health Minister said.
"There are over 100 different collective agreements and a range of rostering, allowances and overtime provisions which have changed over time.
"It's going to take 12 to 24 months for DHBs to rectify this issue and remediation costs will be staggered. Any further funding required will be dealt with through the usual cost pressure budget process."
Finance Minister Grant Robertson opened up the Government's books on Tuesday revealing DHB deficits had reached $1 billion, mostly because of the $650 million worth of underpayments owed under the Holidays Act.
Nevertheless, the Government is sitting on a healthy $7.5 billion surplus due to more tax being collected, strength in the economy, and a change in the way KiwiRail is valued.
National's health spokesperson Michael Woodhouse had harsh words for the Health Minister on Tuesday for allowing DHB deficits to "balloon to record highs".
"The Government has neither provided the funding they claimed they would nor set expectations for continued fiscal discipline," Woodhouse said.
"The sustainability of New Zealand's public health system is at critical risk and the Government needs to immediately provide reassurances to New Zealanders."
Dr Clark said more than half of the $1 billion DHB deficit is due to one-off costs, while $590 million is for Holidays Act compliance.
He said $32 million is a result of the doctor strikes, and $44 million is for an IT system, the National Oracle Solution, sold as a common system across all DHBs for ordering and paying for things.
Four DHBs - Canterbury, Waikato, Counties Manukau and Southern - account for 65 percent of the underlying deficit, $268 million in total, the minister said.
"While it will take time for some DHBs to reach a breakeven position, it can be done."
Dr Clark said he has strengthened financial management at the DHBs with the largest deficits, with Crown Monitors placed in some of those underperforming organisations.