13 Apr 2022

Confusion as employers may be saddled with public holiday cost for those on ACC

9:43 am on 13 April 2022

An overhaul of the Holidays Act has thrown up a new, curly problem that could cost employers.

Pile of New Zealand currency laying flat on table

MBIE has decided that its guidance to employers over the payments needs to be reviewed. Photo: 123RF

Authorities are belatedly advising that employers are liable for public holiday pay for a worker on ACC, if they would otherwise have been working.

The Ministry of Business, Innovation and Employment admits the official guidance from it and ACC (Accident Compensation Corporation) has been unclear.

ACC's advice on its website goes like this: "You may need to pay your employee for public holidays while they're getting weekly compensation.

"The Ministry of Business, Innovation and Employment can let you know what your obligations are. You'll need to let us know if you do pay them for public holidays in case it affects how much we pay them."

But, batted over to MBIE, the employer has then been faced with advice so variable that the ministry has in the last 24 hours canned its latest variation.

"Based on feedback from stakeholders we accept that more guidance and information is needed," its general manager of workplace relations and safety policy, Anna Clark, told RNZ yesterday.

"MBIE has removed this content from the website and is working on updated guidance ... [which] will be communicated to stakeholders shortly."

NZ Payroll Practitioners Association chief executive David Jenkins first drew attention to the confusion.

"What has happened in the past is, if there's a public holiday while they're off, the compensation covers that public holiday, and the employer doesn't have to pay any additional payment.

"Now we've just received an update from MBIE that's basically saying, when an employee now goes off on ACC and is paid compensation by ACC, it will mean that the employer is liable to pay for the public holiday while they're off."

This was despite ACC advice to the contrary in the past, that compensation did cover public holidays, he said.

It was "just another stupid and uneducated" ruling from the ministry on the unworkable Holidays Act, Jenkins told his payroll provider members.

"What is the purpose of having ACC levies in place to now find the employer ends up having to pay on top of the levies already paid?" he said in an email to them.

Jenkins told RNZ it was "a major change because it's talking about an additional cost that employers will have to wear going forward".

"And there's the potential because the liability for Holidays Act goes back six years, that it could mean that MBIE requires employers to go back six years to cover off every time this situation has happened, to then create a backpay for the employee.

"That is major work, and it's time consuming."

He was trying to pin down if a six-year retrospective liability applied.

Business New Zealand said it began fielding a lot of calls yesterday from members.

"We don't know how big the problem is," its manager of employment relations policy Paul Mackay said.

"The first step is to get a handle on the extent to which people have had this issue or this confusion, and the extent to which they have applied it.

"All of that is kind of unknown, because really this is a very recent example that's just cropped up."

It was one more straw on the camel's back of "things which haven't gone right" with the 20-year-old Holidays Act, Mackay said.

Those problems revolving around mistakes in shift and holiday pay for years, have cost thousands of businesses hundreds of millions of dollars in backpay since this came to light in 2014.

The calculations are a nightmare because earnings history and leave patterns are unique, especially so in places with multiple shifts such as hospitals.

Mackay is part of the group undertaking the long-drawn out overhaul and overdue simplification of the Act, who have just been handed one more twist to unwind.

"The next thing is the group ... will be addressing this ... and that will take place as early as tomorrow," Mackay said.

ACC referred RNZ's query to MBIE.

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