The widespread problems relating to compliance with the Holidays Act 2003 have recently hit the headlines again.
Media reports this week have stated that the Ministry of Business Innovation and Employment (MBIE) has worked with 156 employers between July 2012 and September 2017 on Holidays Act compliance issues. Of concern is that all of these employers were non-compliant with the Holidays Act in some way. As a result of these reviews, it is reported that employers have already paid out $4.8 million in underpayments to around 15,000 employees between July 2012 and September 2017.
Non-compliance with the Holidays Act 2003 is an area that Bell Gully regularly advises on, including providing tailored advice about: how the Holidays Act applies to a particular employer, conducting third party audits, and rectifying areas of non-compliance. Bell Gully also frequently assists employers with responding to MBIE investigations.
MBIE investigations
The Labour Inspectorate of MBIE frequently undertakes random audits of employers' Holidays Act compliance. Labour inspectors can also investigate an employer upon receiving a complaint about non-compliance. These can come from both current and former employees.
An employer must comply with the requests of a Labour Inspector and assist in their investigation. The audit usually involves the Labour Inspector auditing the holiday pay records relating to employees chosen at random.
Bell Gully regularly engages with the Labour Inspector on an employer's behalf.
If the Labour Inspector determines that there has been non-compliance, an employer can negotiate an enforceable undertaking with MBIE to remedy the non-compliance, and take certain remedial actions, to avoid a prosecution by the Labour Inspector. An enforceable undertaking is a binding agreement, which a Labour Inspector has discretion to accept. Please see our article for more information about enforceable undertakings.
Proactive approach
In our experience, many employers are being proactive and reviewing their Holidays Act compliance without waiting to be approached by MBIE. The advantage of doing this is that an employer has more ability to control the actions following any non-compliance that is discovered, and MBIE looks more favourably on employers who are acting responsibly and being cooperative. The employer can also remedy non-compliance in their preferred way (as there can be a number of ways to achieve compliance with the Act).
Comment
While non-compliance is extremely common due to the technicalities of the Holidays Act, those who are most at risk are businesses that have employees with fluctuating hours, or who receive additional payments on top of normal wages, such as commission payments.
It is likely that the number of businesses who will be audited by the Labour Inspectorate will increase, as the Labour Government has previously committed to increasing the size of the Labour Inspectorate and as the size of the problem becomes better understood.
Bell Gully has considerable expertise in advising on Holiday Act compliance and working with employers to address non-compliance, including negotiating enforceable undertakings with the Labour Inspectorate.
If you or your business has any questions regarding any of the issues raised in our article, please contact one of our team or your usual Bell Gully adviser.