Holiday’s Act 2003 – not much of a holiday for employers

​I am sure that you have all seen the press around employers getting the Holiday’s Act 2003 entitlements wrong.  The Ministry of Business Innovation and Employment itself identified that they had paid holiday entitlements incorrectly. This week the new Labour government announced that a review would be started into the Holidays Act – thank goodness!  The MBIE website states that a new regime is at least 2-3 years away and the new or amended legislation will not absolve employers from compliance with the current Act or remove their responsibility to re-mediate workers for historical underpayments. So even through things may get easier in the future, employers will still need to resolve their current problems.
 
For a small business, interpreting the Holidays Act is a tough call.  Most businesses (including many large businesses) have historically relied on their payroll provider to ensure that calculation of holiday pay and entitlements were correct. Many of these business are now finding that this was a mistake but without the ability to have in-house expertise is an understandable position.
 
So why is the Act so complicated?  It was drafted 15 years ago to reflect what working practices were like at the time.  As I am sure everyone is aware, these have changed and it is not uncommon for employees to work flexible hours, days or even work casually for a number of employers.  The Act simply cannot be easily applied to these kinds of workers.  In addition, it uses different units of measure – days for sick leave, bereavement leave and alternative holidays and weeks for annual leave.  This means that your payroll system needs to perform three different calculations in three different units if measure – hours, days and weeks.
If you are a small business and your employees work varying hours and days, you need to make sure that you get some good HR advice on what you should be paying people for their holidays. Remember that if you have paid employee’s incorrectly you have to recalculate their holiday entitlements going back 6 years. This also includes employees that have left the business.  This is a huge undertaking and employers are encouraged to get outside assistance in auditing their current payroll practices and assisting with the recalculation if needed.