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Addressing Holidays Act non-compliance

The Labour Inspectorate supports employers to comply with the Holidays Act through government-industry work streams, audits and investigations, and education and information.

Payroll Sector Leadership workstreams

A number of joint industry government Payroll Sector Leadership workstreams were established during 2016 to consider how to improve compliance with the Holidays Act. This includes a leadership and governance group, and three workgroups:

The Payroll Leadership and Governance group (PLG) was set up to oversee the Payroll Sector Leaders workstream groups, which have different focus areas to aid in improving compliance with the Act. The PLG directs and steers the groups, and raises and discusses overarching areas of potential impact on employers’ compliance with the Act. The group comprises payroll sector leaders based on their professional business knowledge and industry-specific expertise.

The purpose of the Payroll System Functionality group (PSF) is to identify ways to improve the capabilities of payroll systems and how they are used. This includes working with MBIE to develop guidance intended to help employers and employees in applying aspects of the Act. The guidance will be guidance only, not legal advice, but it will aim to provide a range of scenarios to make sure it is useful for as many people and situations as possible.

The PSF group is integral to identifying areas of concern and creating the scenarios that will help people to comply with the Act. The PSF group comprises MBIE; payroll system providers; professional service providers; and a payroll practitioner body. The guidance is expected to be released in 2017.

The purpose of the Payroll Practitioner Professionalisation group (PPP) is to initiate, develop and support a network of payroll professionals to allow specialists to share their experiences and advice on best practice in order to grow and maintain payroll standards in New Zealand. The PPP is also exploring ways in which payroll can be developed as a career and as a part of this will look to provide recommendations on how this could be achieved.

The group comprises representatives with a range of interests in the payroll practice sector, including small business representatives and professional bodies, as well as senior industry professionals from the public, private and non-profit sector.

The key objective of the Payroll Function Assurance Model group (PFAM) is to consider all aspects of the lifespan of a payroll system, from the point of purchase through to installation, implementation, maintenance, and user interaction, and to determine where the responsibility lies in ensuring a system’s reliability at each of these stages.

PFAM is also considering whether a model can be put in place that is capable of ensuring end-to-end payroll system compliance with the Act. The group comprises representatives from organisations with an interest in the provision of assurance, including legal practitioners; professional service providers; payroll practitioners; auditing and accounting bodies; an accounting body and government.

News and updates

The Labour Inspectorate’s approach to supporting compliance also involves:

  • proactive and reactive audits and investigations of employers
  • education and information including guidance on how to check that your payroll system complies.

Audits and investigations

The Labour Inspectorate has defined “Payroll audit” using the following updated criteria:

  • the audit tests whether, or finds that, an employer is/was systemically calculating employee leave entitlements and payments for BAPS (bereavement leave, alternative holiday, public holidays and sick leave) in respect of multiple employees in a manner that is non-compliant with the Holidays Act 2003
  • the organisation has/had at least 20 employees
  • the payroll system is/was electronic.


Payroll Audit update as at 31 December 2016

 Oct - Dec 2016Jul 2012 - Dec 2016
Cases categorised as “Payroll audit” 17
incl 14 pro-active
incl 37 pro-active
Completed audits 15
incl 12 pro-active

incl 15 pro-active

Of the completed audits

 Oct - Dec 2016Jul 2012 - Dec 2016
Cases where one or more compliance tool applied
NB. It is possible for multiple tools to be used in respect of one case
7 66
Enforceable Undertaking 7 40
Improvement Notice 0 28
Referral to the Employment Relations Authority 0 2
Record of Settlement 0 2
Voluntary compliance 0 3

As shown above, one or more compliance tool(s) has been applied in respect of 66 of the 81 completed payroll audit cases. The remaining cases are still under consideration by the Labour Inspectorate.


Payroll audits commenced and completed


An Enforceable Undertaking is a voluntary commitment by the employer to address the breaches within a certain timeframe. If that does not happen, the Employment Relations Authority (ERA) can issue a compliance order and if that is not followed, then an order for penalties. If for instance money owed to workers is not paid, the breach may go straight to the District Court for civil debt enforcement proceedings.

An Improvement Notice describes the employment law breach, the date and steps by which the employer must comply. If the employer fails to do so, the Labour Inspector may seek enforcement through a compliance order from the ERA.

Holidays Act non-compliance remediation payments update as at 31 December 2016*

 Oct - Dec 2016Jul 2012 - Dec 2016
Number of employers who have paid arrears 1 30
  • $500 per employee or less
0 22
  • Between $501 and $1,000
1 5
  • $1,001 or more
0 3
Amount of arrears paid $85k $4.5m
Number of employees paid arrears 124 9.5k
Range of average gross payment per affected employee per employer $685 $55 - $1.3k

*Figures reported above do not include NZ Police data. NZ Police have made five arrears payments totalling around $37 million, and have more payments to come as they await the implementation of their new compliant payroll system. NZ Police figures will be added to the table once final payments have been made and total dollars and affected employee numbers confirmed.


Gross payout by number of afffected employees


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