The penny has finally dropped! It has finally been officially recognised that the Holiday’s Act is not an easy piece of Legislation to work with!

Come on …… is anyone genuinely surprised by this revelation? The reality is that countless people, be they professional payroll or HR specialists in public or private corporations or the owner-operators of small businesses, are likely to have bald patches after more than a decade of the severe weekly head-scratching that so often comes with Holiday Pay computation caused in large part by the complexity of the Holiday’s Act!

The labour inspectorate of the Ministry of Business, Innovation and Employment (MBIE) is now actively and systematically seeking out businesses that may have committed payroll-related breaches of the Holiday’s Act. The GM of the MBIE Labour Inspectorate is quoted to have said: “At risk employers are those who have employees who have fluctuations in the hours they work, or receive additional pay on top of their normal wages, such as for shift work or commission payments”.

Is this not exactly where the problem lies? Long gone are the days when the regular 8:30 to 5:00 job was the norm and for which the Holiday’s Act seems to have been designed. Instead, today’s workforce is all about flexibility, irregular shift patterns and fluctuating incomes. It is clear – and dare I add, has always been clear – that the Holiday’s Act was not designed to deal with any form of flexibility, irregularity or fluctuation in either working time or income.

After saying that employers are to take more care when preparing their holiday pay computations, the GM of the Inspectorate goes on to say that: “Of the 42 investigations (carried out since 2012), 20 had been completed, and so far have involved ten Improvement Notices, six Enforceable Undertakings, one application being lodged with the Employment Relations Authority, and two voluntary compliance acts.”

That means that 95% (19 out of 20 cases) of these employers have been found to be not compliant with the legislation! Besides calling for huge kudos to the one employer that seems to have got it right, does this not say something about an urgent need for a complete overhaul of the legislation that these employers have all been trying hard to abide by, albeit quite clearly unsuccessfully?

There are already thousands of people who have been found to have received less holiday pay than they should have, including staff of the MBIE itself. Extrapolate the outcome of these 20 investigations to cover all employers and all of the years since the introduction of the Holiday’s Act, and it is likely that the number will quickly grow to the hundreds of thousands. This certainly needs to be remedied somehow, although I dread to even think of the myriad complications and implications involved with such an exercise! Besides tying up countless MBIE and ERA resources for years to come, the IRD for one will have a field day trying to calculate and collect new income tax and PAYE due by employees and employers respectively!

If ever there was an urgent need for a multi-party approach involving law makers, employers and employee representatives and technical experts to find a more pragmatic solution to this mess, this will surely be it.

Read the full text of the MBIE press release here: