Holidays Act nothing but a headache

Kearin Pollard urges business owners to act now on resolving any outstanding holiday pay issues for their employees, or they could potentially pay a high price later.

If you’re a business owner, the chances are very high that you may be breaking the law. That’s a difficult thing for business owners to hear because most want to do the right thing by their employees. The reason for this is not intentional, it’s because the Holidays Act has been so difficult to interpret and apply that most employers are getting it wrong at times. 

In my experience, most employers are hardworking and ethical people who want to do right by their employees. But the legislation around holiday pay has made that next to impossible. 

In my many years of involvement with payroll, I’ve very rarely seen a business consistently process leave calculations correctly. We’ve all heard how flawed the legislation is, with one estimate claiming up to a million Kiwis could be owed holiday entitlements. Not only have we seen Bunnings repay $11 million to employees, but the Police and even the department which enforces the Holidays Act, the Ministry of Business Innovation and Employment (MBIE), have both unwittingly ripped off their staff. 

Waiting for new legislation to solve everyone’s problems won’t be enough. A working group has been formed as a result of so many Kiwi businesses getting it wrong. The working group isn’t due to report back to the Government until the middle of next year, with new legislation due to be in place by 2020. I’m optimistic but not confident that this will make the Act more user-friendly. 

In the meantime, employers can’t afford to wait to resolve outstanding issues. 

Employees are right to be concerned that they’ve been missing out on their correct holiday entitlements. I’ve seen cases of individual employees who have been underpaid up to $7,000 over the retrospective six-year period being investigated by the Labour Inspectorate. 

For small to medium enterprises that are already struggling, the bill for redressing past mistakes could potentially close their doors. That’s why it’s so important to get the law right this time. The primary goal of the review must be to ensure the Act is easy to interpret and implement.

If our Government departments can’t interpret this law properly, there’s very little chance that individual businesses can.  

My advice would be to front-foot this. Get advice. All it will take is one complaint from an employee for your entire payroll process to be in question. 

MBIE has issued guidance to employers on the correct way to interpret the Holidays Act as it stands. I encourage employers to contact MBIE if you have any questions or seek help from a reputable consultancy practice. Check whether you might be liable, so you can get the issues sorted before you go even further down the wrong path over the next two years. 

Acting now may well be best treatment for a major Holidays Act headache.

Kearin Pollard (pictured) is an employment legislation and compliance expert at Staples Rodway.