Staff who receive part of their pay in bonuses could find they’ve been short-changed on holiday pay due to employer confusion over changes to the Holidays Act.
Global recruitment firm Adecco is facing a big back-pay bill after wrongly calculating holiday pay – a mistake that’s said to be tripping up other employers.
The underpayment, which dates back to 2003 when the legislation was changed, emerged in a personal grievance case between the company and its former New Zealand, CEO Fleur Board. The Employment Relations Authority ordered Adecco to pay more than $17,000 for holiday pay out of a total $30,000 pay out.
At issue was whether annual bonuses and other incentive payments should be taken into account when calculating holiday pay or whether they are deemed to be discretionary.
The Holidays Act says annual holiday pay should be calculated on whichever is the highest figure of either ordinary weekly pay or the employee’s average weekly earnings for the year.
Adecco’s legal counsel, Kathryn Beck of Swarbrick, Beck, Mackinnon, said the question is whether the bonuses or commissions should be included in the average weekly earnings for the year. That hinges on whether the payment is written into the employment contract (regardless of whether the amount paid is discretionary) or whether it’s a one-off unplanned payment.
Board, who worked for the company for 18 years including four as CEO, said she made Adecco aware of the problem in March 2010. Her view was confirmed by an ERA ruling out last week.
Adecco managing director Mike Davies said most employers could be caught out. \”It’s all a result of the 2003 Holidays Act changes and a lot of companies are not aware of it and have continued on doing what they were doing before.\”
Beck said it was \”not an uncommon mistake\” and many automated payroll systems weren’t set up to check whether ordinary weekly pay or average weekly earnings was higher when calculating holiday pay.
Adecco has since revised how it pays holiday pay and has been reviewing staff contracts to how much staff may be owed. Davies estimated around 15% of its 85 permanent staff were affected. He was \”just about to talk to staff\” who hadn’t yet been told about the payment error.
\”But if someone thinks they’re going to win Lotto out of this, that’s not the case.\”
The Holidays Act allows claims for the preceding six years, so anyone who had worked for Adecco since 2005 in a role where bonuses were paid could now have a claim.
Employers & Manufacturers Association (Northern) employment services manager David Lowe said legislation passed earlier this year provides a fresh definition of what is discretionary but \”for some it has helped and for others it has made it worse\”.
The Holidays Act was notorious for having \”one-size fits all\” rules that don’t suit every business, Lowe said, and it would be better to have principle-based legislation rather than rules.
– Sunday Star Times
Reference: http://www.stuff.co.nz/business/industries/5678659/Firms-face-back-pay-nightmare