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Inspectorate moves to clear up confusion on holiday pay

06 December 2017

Following an ERA determination relating to Wendco (NZ) Ltd (Source: Employment NZ) [PDF 245 KB], the Labour Inspectorate is advising businesses that have been following similar processes to take steps to meet their obligations under the Holidays Act 2003.

“As the ERA has indicated, an easy approach for a business to take using ‘blanket rules’ to determine holiday entitlements isn’t the same as a lawful one,” says Payroll Lead Tania Donaldson.

“The use of a ‘three week rule’ by Wendco (NZ) Ltd to work out entitlements around public holidays meant some employees were not being provided with their full entitlements, and the employer was not meeting their obligations under the Holidays Act.

“To work out an employee’s rights to an alternative holiday, you need to know whether the day is an ‘otherwise working day’ for the employee.

“Working out whether the day is an ‘otherwise working day’ is a practical task, and each situation needs to be considered based on the employee’s specific situation and work pattern, where employers consider and apply all of the factors of s 12 of the Holidays Act where they are relevant," says Ms Donaldson.

“If it’s unclear whether the day is an ‘otherwise working day’, the things that may need to be considered include what the employment agreement says, the employee's usual work patterns, what the rosters say, whether the employee would normally have worked, and any other relevant factors.

“Employers who configure their payroll system in a way that is convenient to themselves without proper regard to their obligations run a high risk of being non-compliant. While these considerations may require additional effort for some businesses, this is the law and they must abide by it.”

“If any employer has breached their obligations through the use of such blanket rules, they must fix their processes to prevent future breaches, and ensure they pay their employees what they’re owed for past breaches.

“This is important as when employers fail to meet their obligations, the employees working hard to sustain the business miss out on their minimum entitlements. In addition, other businesses that do properly meet their obligations face unfair competition.”

Last updated on the 16th September 2019