Businesses need to take a hard look at the job of their often low-paid and overwhelmed payroll staff, says a top employment lawyer, as New Zealand continues to grapple with the nightmare of historical holiday leave underpayments.

Ernst Young (EY) Law employment law leader Christie Hall said new holiday pay and leave legislation is still years away despite the current Holidays Act review and fixing historic underpayments to staff is piling up.

Getting professional advice was becoming essential as the remediation payment obligations could send some small to medium businesses under as they had not factored the labour cost into their product pricing in the six years since government policing of employer obligations started.

Consultants are finding payroll problems throughout the country as companies struggle to interpret law anchored in regimented 1970s workplaces against the much more flexible and variable hours of 2018 and Hall said calling in professional help was becoming a necessity.

“Payroll people haven’t been equipped to do their jobs properly.

“Our payroll people today are managing a massive amount of money, managing financial risk, managing an incredibly complex and quite frankly not-fit-for-purpose piece of legislation that doesn’t always accord with the guidance that goes with it.

“They’re managing a regulator [MBIE] who is also on a learning curve. They’re managing pieces of software that often don’t talk to each other. Often time-and-attendance software isn’t linked to the payroll software,” Hall said.

“In many organisations they’re also managing a whole range of different contracting requirements and a whole range of workplace practices.

“Put all that together and you pay someone $30,000 to $40,000 and call them a wages clerk and you wonder why you get a problem.”

A Government taskforce reviewing the 2003 Holidays’ Act is due to update its latest findings and progress any day. The taskforce’s final report is due out in June and any new legislation is at least two years away.

Meanwhile the Government, through the Ministry of Business, Innovation and Employment (MBIE), continues its switch from reactive policing of the Holidays’ Act by responding to complaints to proactive, and underpaying companies and organisations have faced bills ranging from thousands of dollars to about $40 million for the NZ Police.

Hall said even bigger bills could be looming for other government sectors. But although taxpayers would pick up the bill for the public sector, small or medium business could go under.

A large number of New Zealand employers were affected by the problems caused by “legislation in 2003 based on a 1981 Act”, she said.

Most affected were employers in industries with highly variable hours, or paying commissions, allowances and other add-ons.

‘Businesses need to rethink payroll’

“This is where you need an actively managed payroll. Instead, a company purchases software and thinks they’re getting compliance.

“Business in New Zealand needs to rethink the payroll function – what that job looks like, the size of it, what sort of person you want there, what training and support you are going to provide for people in there.”

Hall said new IRD reporting requirements would add another dimension.

“We have two different regulators and two different statutory regimes around tax and the Holidays Act. Just because you are giving information to IRD doesn’t mean MBIE will automatically get it.

“And MBIE has a resourcing problem. They’re auditing and they’ve embarked on a proactive regime as opposed to the previous reactive one – that’s fine but it’s taking them a while to chew through some of these audits. With quite big complex companies you’re looking at a two-to-three-year process to get all the stuff unwound, which results in some pretty huge costs to a company.

“The problem is, if you have an error in, say, an annual leave calculation, it impacts on the gross earnings amount you use to calculate the subsequent annual calculation, and on it rolls and rolls.”

Latest available figures from MBIE show that between July 2012 and September this year it audited 165 entities and completed 144 audits. Most payouts were in the $600 to $1200 range, totalling $18.9 million to 34,000 people. Eight employees had been paid $1001 or more. Average payments per affected employee per employer ranged from $29 to $4100.

The figures did not include NZ Police cases or remediation cases under “watching” status.


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