There have recently been reports in the media that Police and the Ministry of Business Innovation and Employment (MBIE) have got issues with their payroll. This is particularly embarrassing to MBIE as they are responsible for the administration of the Holidays Act.
See the NZ Herald story here, and Newstalk ZB's story here
What is the problem?
There has not been any public disclosures describing the exact issue, the description has been that “staff have been paid the wrong amount in holiday entitlements.” The issue is being blamed on “very complicated” law changes.
What has gone wrong
The Holidays Act is complex, there are two different types of holidays and four rate calculations definitions as summarised below:
Ordinary Weekly Pay
Average Weekly Earnings - last 52 weeks earnings / 52
Other Leave, this includes: Sick, Bereavement, Public Holidays, Alternate Public Holidays
Relevant Daily Pay - what an employee would have earned had they worked that day
Average Daily Pay - last 52 weeks earnings / number of days paid in last 52 weeks
There is also room for interpretation on how much Annual Leave an employee will become entitled to at their Employment Anniversary when they work variable hours. There are further issues when Parental Leave is added to the mix.
All in all I agree that the Holidays Act is too complicated and needs to be simplified.
What KeyLink does to combat this complexity
We work with our customers to come up with payroll solutions that meet their needs. For most clients we recommend the following:
Where employees have fixed hours – use these as the base for all calculations
When employees have variable hours – use these as the base for all calculations. This may need a special clause in your Employment Agreements.
Other Leave Use Relevant Daily Pay
We can and do support many different methods of calculating holiday pay rates and entitlements including Average Daily Pay.
You know if you trust KeyLink with your payroll processing that we will:
Work with you to ensure you know your responsibilities to your employees.
Work with you to determine the best leave calculations for your employees.
Help you with drafting leave clauses in employment agreements.
We do all of this so that you don't need to worry about leave calculations and can get on with running your business.
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