17 Nov 2022

Holidays Act fix: Cost of backpay for health workers balloons to $2b

10:29 am on 17 November 2022
Euro Pay slip and calculator, close up for payroll or salary background, french mention Net to pay

Even some of the most basic questions about how to do the payouts properly are not resolved despite years of talks between health authorities and unions. Photo: 123RF

The amount the country's hospitals owe to more than a quarter of a million people has exploded to almost $2 billion.

An internal update from Health New Zealand shows the massive job of fixing payroll breaches is bogged down.

Since 2016, thousands of companies and agencies have had to pay out hundreds of millions in backpay for breaches of the complicated Holidays Act.

Hospitals have known for years they were in breach. The government rejected interim payouts in 2020.

But the update showed the hurdles of getting money into workers' hands were increasing, with even the most basic questions not addressed.

It was estimated 270,000 people were owed a combined $1.8b-$1.95b at least - almost a doubling since 2021.

It also showed more than half the 20 health districts have not started several crucial tasks that must be done by next March to trigger any payout due to start from June 2023.

Major hospitals in Auckland, Waikato and Wellington were among some of the worst delayed.

Time and resources were among issues.

"Resourcing remains a major concern for many projects, however, significant progress continues to be made to secure the required resources," the update said.

In February, the liability was put at $1.5b. But back then only four districts were sparking "significant concerns", but by October that has jumped to 13.

Even some of the most basic questions about how to do the payouts properly were not resolved despite years of talks between health authorities and unions.

"The timelines provided are increasingly at risk due to the delayed resolution of national questions," the update, that shows each hospital district's progress till 31 October, said.

"The continued delay means these timelines are [or are likely to be] impacted."

Two deadlines for resolving the 'national questions' were breached in August, and again in early October, sparking mediation talks between Te Whatu Ora Health NZ and the unions on 18 October, the update showed. The talks are continuing.

Apex union national secretary Dr Deborah Powell is angry.

"We are now being told no payments until late next year. It is an absolute outrage," she said.

"Workers are owed money back to 2010. They won't be paid interest on the money or even compensation for use of money and still it drags on."

One of the questions being haggled over was "what is a week?" - it has been tricky because of all the various shifts that run in hospitals.

'They do not have the funding'

Resources were another bugbear, not just to get the fixes done, but to keep hospitals' payroll systems running in the meantime.

"The [Auckland] districts have indicated that they do not have the funding to carry out this work and will need to get it from the Ministry [of Health]," the update said.

"How much of the budget will be approved is currently unknown."

Between them, Auckland City, North Shore and Middlemore hospitals owe money to 117,000 people.

The update was full of timelines, but said of eight districts: "zero of these dates have been met to date".

All 20 districts - which are running 16 projects, as Auckland, Wellington and Canterbury represent multiple districts - have to do seven tasks to get Treasury to release any money.

All of them have done the first task, but only one, Northland, has done the second task.

No start made

More than half the districts have not even started on five of the tasks, yet they must get these done by March, if payouts are to start by June.

Seven of the 16 projects are not even hazarding a guess of when payouts will begin, or are revising their estimate.

Waikato has the latest forecast for starting payouts - May 2024.

It owed more than 20,000 workers and was still working on data from before 2015.

The three Wellington district hospitals were still inputting "data from paper timesheets", as part of the second phase of the payroll fix, called 'rectification'.

"Appropriate levels of planning have yet to be completed," Wellington's update said.

The district health boards knew from 2013 their payroll systems were breaching the law.

Since the Holidays Act was publicly exposed as a minefield in 2016, public and private entities have paid out or begun to pay out hundreds of millions of dollars in backpay - ranging from NZ Post to the police to McDonalds - and even MBIE which polices the holidays laws.

The government ruled out interim backpay to hospital workers in 2020.

"We're resolving it once and for all," then health minister Chris Hipkins said at the time.

A lot of health workers were also waiting for pay equity to be sorted out, which has been taking several years.

Time has slipped by for replacing the act itself - that's been under review now for four years.

Health NZ said in a statement all workers, current and former, would be paid what they were owed.

It was a "mammoth" job.

While there was no set date to wrap it all up, payment to all current employees would have been made or be on the way to being made by 30 June 2023, it said.

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