Author: David Jenkins, NZPPA CEO

VERY Important: I will state this now: what AI provided in this article is WRONG. Do not follow this in any shape or form!

There is a lot of talk about AI in the news, and I am seeing it flow through to payroll providers, stating it is the next big thing for payroll.  I believe in the future, part of payroll may involve some use of AI, but as the payroll practitioner, “YOU” are what holds everything together, and AI will never replace that!

So, I wanted to test where AI is at, with one of the most complex issues we have in New Zealand payroll – the Holidays Act 2003. I was fair in my approach, only asking a question on how annual holidays are calculated under the Act. I did not ask for anything more than that.  The following extract is what ChatGPT provided. Now, I have placed [WRONG] next to any statement that is misleading to the point of being dangerous.

I entered the following question into ChatGPT:

  • How to calculate annual holidays provided under the Holidays Act 2003?

ChatGPT Response:

Calculating annual holidays provided under the Holidays Act 2003 in New Zealand involves several steps and considerations. The Holidays Act 2003 provides different entitlements based on the employee’s length of service, work patterns, and whether they work on public holidays. Here’s a general guide on how to calculate annual holidays:

1. Determine the Relevant Period:

    • The “relevant period” is typically the 12-month period immediately before the end of the last pay period before the employee takes the annual holiday. However, for some employees, this period can be different, so check your specific circumstances. [WRONG]

2. Calculate the Ordinary Weekly Pay (OWP):

    • The Ordinary Weekly Pay (OWP) is used as a basis for calculating annual holiday pay. It includes regular wages and salary but excludes overtime, bonuses, and other irregular payments. [WRONG]
    • To calculate OWP, sum up the gross earnings in the relevant period and divide by the number of weeks in that period.
      OWP = Total Gross Earnings / Number of Weeks in Relevant Period [WRONG]

3. Determine the Employee’s Entitlement:

    • Employees are entitled to annual holidays based on their length of service:
      • After 12 months of continuous employment, an employee is entitled to two weeks of annual holidays. [WRONG]
      • After every subsequent 12 months of continuous employment, the entitlement increases by one week, up to a maximum of four weeks. [WRONG]

4. Calculate the Number of Weeks of Entitlement:

    • Divide the employee’s entitlement by the number of weeks in a year (52 weeks) to find the number of weeks of annual holiday entitlement. [WRONG]
    • Weeks of Entitlement = Total Entitlement / 52 weeks [WRONG]

5. Calculate the Annual Holiday Pay:

    • Multiply the number of weeks of entitlement by the OWP to calculate the annual holiday pay. [WRONG]
    • Annual Holiday Pay = Weeks of Entitlement x OWP [WRONG]

6. Consider Other Factors:

    • If the employee works on public holidays, there are additional entitlements and calculations based on the Holidays Act 2003, which may include time and a half or alternative holidays. These calculations should be done separately.

It’s important to note that there are specific rules and provisions in the Holidays Act 2003 for different employment situations and scenarios, including part-time, casual, and irregular work patterns. It’s advisable to consult with your organization’s HR department or a legal expert familiar with New Zealand employment law to ensure accurate calculations and compliance with the law. Additionally, the law or its interpretations may change over time, so always refer to the latest information and resources available from the New Zealand government or relevant authorities. [Could not stop laughing – contact your HR department! From my experience, it is the other way around – HR contacts payroll!]

In conclusion, if you work for MBIE, ChatGPT would work as it sounds a lot like the garbage they spin [JOKING].  The big thing about AI is it is only as good as what it bases its response on, so the adage “rubbish in, is rubbish out” is indeed correct.  The only way AI can work for payroll is when the source it draws its response from is verified and for payroll, it means if it is not, we cannot trust an AI response as it could easily undermine compliance. So, AI has a long way to go in this regard.

NZPPA supporting NZ payroll since 2007!

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