What is the Holidays Act?
The Holidays Act 2003 is the fundamental piece of legislation outlining leave entitlements for employees. It applies to Te Whatu Ora Te Matau a Māui, Hawke’s Bay (formerly HBDHB), and all our employees. The Holidays Act 2003 sets out how payment for leave and final pay is to be calculated and paid. The Act came into effect in April 2004. It applies to full-time, part-time, permanent, temporary and casual workers provided they are engaged under employment agreements.
The Holidays Act is a complex piece of legislation, with varying calculations and entitlements for different leave types which can be interpreted in several different ways. This means many organisations have miscalculated holiday pay.
What is the issue?
While the Act is generally easy to follow for those working traditional hours (9-5), it has proved complex for some employers to interpret for shift work, variable days and hours or those with flexible work patterns, which impacts many in the health workforce.
This resulted in some entitlements for annual leave, bereavement and sick leave, public holidays and alternative holidays (lieu days) not being correctly calculated and means some of our people may not have received everything they were entitled to and may not have been paid correctly.
There has been widespread non-compliance with the Act in a range of public and private sector organisations in New Zealand.
We are fixing this by calculating and making remediation payments to anyone who has been incorrectly paid. More than 100,000 health workers will have their holiday pay calculations reviewed starting from 1 May 2010 with an undertaking that any shortfall will be refunded.
Former District Health Boards (DHBs), the New Zealand Blood Service (NZBS), the New Zealand Council of Trade Unions (CTU) health unions, and the Labour Inspectorate have worked together to develop an agreed national audit process.
How far back will remediation payments go?
We are required to go back six years from the date non-compliance is identified.
The Council of Trade Unions (CTU) raised the issue of non-compliance with the Act with the DHB’s in May 2016, so remediation payments will go back to 1 May 2010.
Other organisations with similar issues have also gone back six years.
Are other organisations and other former DHBs affected?
Yes. A number of both public and private sector employers in New Zealand are also impacted. Like us they are working hard to resolve this issue. We are in communication with the Ministry of Health and other former DHBs working through similar issues to ensure that we use the National Guidance and take a consistent approach to becoming more compliant.
How many Te Whatu Ora Te Matau a Māui, Hawke’s Bay staff might be affected?
We are reviewing the payroll records for every employee and ex-employee commencing with the pay period beginning 1 May 2010. At this stage is it unclear exactly how many employees may be impacted, however, it is likely to be a large number - in excess of 9000 employees and ex-employees total.
How will this process work?
Each former DHB is carrying out a review and rectification process of their end-to-end payroll system and a subsequent remediation process. The agreed solution between all former DHBs and unions is to review and then rectify any shortfall in payment to any current and former employees for pay periods beginning 1 May 2010. The rectification process is undertaken to correct the processes and ensure that all future payments are calculated and paid correctly.
How will the process progress?
Former District Health Boards (DHBs), the New Zealand Blood Service (NZBS), the New Zealand Council of Trade Unions (CTU) health unions, and the Labour Inspectorate have collectively signed a Memorandum of Understanding which sets out the ‘Framework for Local DHB Holidays Act Review’. The Unions are represented on the Te Whatu Ora Te Matau a Māui, Hawke’s Bay (formerly HBDHB) Steering Group and Compliance Team which are the two groups set up to oversee the process.
What are the Phases?
There are 3 key phases.
This phase was completed in January 2021. We have external auditors testing our payroll system against the Baseline Interpretation agreed by the former DHBs and Unions to identify breaches and estimating the liability.
Rectification & Recalculation
This involves resolving any identified issues of non-compliance with our Holidays Act 2003 entitlements and applying processes to ensure future entitlements are compliant. During this phase we will identify all current and former employees who are affected by non-compliance. We estimate this may take approximately a year.
This involves calculating and paying any amounts owing to current and former employees. There will be a national process for former DHB employees (e.g. those who worked for Te Whatu Ora Te Matau a Māui, Hawke’s Bay (formerly HBDHB) at any time since 1 May 2010) to register. The amounts due to existing employees can be processed through our usual processes. We estimate this process will take about three months to complete.
What about former Te Whatu Ora Te Matau a Māui, Hawke’s Bay (formerly HBDHB) employees?
Past employees of all former DHBs will be able to register their contact details on a national website specifically set up to enable former employees to provide up-to-date contact information in a central database. We will then be able to contact past employees through the contact information they provide on this national website. A link to this website will be available here soon, once the site is available.
Current Te Whatu Ora Te Matau a Māui, Hawke’s Bay (formerly HBDHB) employees should not register on the national registration website.
When will I know if I have money owed to me?
We will be in touch with all past and present employees during the remediation phase. This is likely to be at the start of 2023. We will contact our present employees first and then past employees.
Will everyone receive a payment?
No. Not every current or former employee may be impacted by the non-compliance issues. Some types of holiday pay were correctly calculated, which means not everyone will receive a payment.
If you do receive a payment, you will know on the date payments are made.
What if I’ve been overpaid holiday entitlement?
The emphasis is on paying staff what they are owed. Looking into this will also help us to identify situations where we may be overpaying staff – if we are, we will correct this.
How will this be paid?
The Government will provide the funding for the payments once each project has completed the national assurance framework and the Ministry of Health and Treasury have approved that the framework has been complied with.
How do I know what is happening?
We will now begin to update information on our intranet and also on the Te Whatu Ora Te Matau a Māui, Hawke's Bay website and the national website as we move through the three phases of the process.
Will there be any tax or other implications?
To the extent there are underpayments, the payments to you will be taxed in accordance with the Income Tax Act based on your tax code. Therefore, it is possible your total earnings may be higher which may increase your overall tax rate and have implications for family support allowances, student loans, tax payments, superannuation etc.
What happens if I’m owed money?
As a current employee, if we identify that you have been underpaid, we will share with you a statement that shows the calculations once we have completed the review assessment. We have your bank account details in our payroll system and the payments are likely to be processed through our payroll system.
When will current entitled staff receive a payment?
Payments dates will vary for each region, as each region is working through their own process and there are many variables and assumptions.
It is anticipated that all projects will be on the pathway to making a payment or will have made a payment by 30 June 2023 for staff who are current on the payroll in the weeks before the payment is made.
We will advise people through a variety of communications channels. We already have all the details needed to make payments, in our payroll system. Each impacted employee will receive a statement with a breakdown of how any payments were calculated.
When will former entitled employees receive a payment?
Payment processes will vary for each region, as each region is working through their own current and former staff and there are many variables and assumptions.
Current employees will be paid first and then the payments owing to former staff will be calculated.
At this stage there is no timeframe for former employees to receive payments, however due to the size and complexity of the project this is unlikely to be before 2024.
If I am entitled to a payment, how much am I likely to receive?
Unfortunately, it is not possible to give an estimate of how much employees will receive because earnings history and leave patterns are unique.
Each employee's payments will be recalculated individually for the remediation period from 2010 to the last working day or the end of the last pay period. As a result, each eligible payment amount will be different.
Each person who is entitled to a payment will receive a statement of how that entitlement was calculated.
Why does the process take so long?
This is a complex process involving policy, practice and system configuration factors. It’s absolutely vital that we get it right and complete it thoroughly takes time. In addition, we are part of the national process which is intended to achieve consistency across former DHBs.
Do I need to do anything now?
No – you don’t need to do anything at present.
We’ll keep you updated as we progress through review, rectification and remediation alongside the Unions, our auditors and the Labour Inspectorate.
Are you working with unions on this work?
Yes. Regions are working hand in hand with all relevant unions in the health sector.
The outcomes we want, compliance with the Holidays Act and correct pay for all employees are also the outcomes unions want for their members.
Why is pay only being backdated to 2010 when the Holidays Act has been in place since 2003?
An action for payment of arrears under s131 of the Employment Relations Act is subject to a six-year limitation period from the date on which the historic DHB’s first became aware of the issue which was May 2010. The issue was bought to the DHB’s attention by the Council of Trade Unions (CTU) in May 2016.
What if I started working at a DHB after 2010?
If you joined after 2010, then your remediation review period begins on the date you commenced employment.
Will payments include interest?
No, remediation payments will not include interest.
I have heard a large sum of money is involved. Is Te Whatu Ora currently gaining interest on this money?
Te Whatu Ora is not holding any remediation money. Any remediation money will be made available to be paid out to those entitled to receive it when compliance with the requirements of the Act is assessed independently and reached.
How will KiwiSaver and superannuation contributions be managed?
KiwiSaver deductions and contributions will be calculated as part of any remediation payment. Other superannuation contributions won't be calculated or deducted due to the way in which they're calculated.
How will student loan repayments be managed?
Student loan repayments will be calculated as part of any remediation payment.
What about voluntary KiwiSaver deductions?
Voluntary KiwiSaver deductions won't be deducted from any remediation payment. It's the responsibility of the individual for their voluntary KiwiSaver deductions to be paid directly to Inland Revenue.
Who identified there were problems with compliance with the Act and how wide ranging are they in New Zealand?
In 2015, the Labour Inspectorate conducted compliance audits against the Act in large organisations throughout New Zealand and found seventy per cent of the organisations they audited to be unintentionally non-compliant with the Act to varying degrees. This included the then 20 District Health Boards (DHB’s) resulting in some staff receiving incorrect leave payments and holidays entitlements.
In May 2016 the Council of Trade Unions (CTU) raised concerns about compliance with the Act by the then DHB’s. An initial review by DHB’s indicated there were concerns with compliance.
On 5 February 2020, the DHB’s, Labour Inspectorate, Council of Trade Unions (CTU) and associated unions signed a Memorandum of Understanding (MoU) which included a baseline document which outlined the agreed assessment to meet compliance with the Holidays Act. The MoU forms the basis of the work that is being is undertaken.