Payroll problems may mean thousands of nurses and other health care workers have been underpaid
Police payroll errors, revealed earlier this year, have resulted in tens of millions of dollars being paid to current and former staff. The Ministry of Business Innovation and Employment (MBIE) subsequently revealed that 20 completed investigations showed 24,000 private and public sector workers had been underpaid, with another 22 investigations yet to be completed. There was widespread speculation on the extent of the problem, with some suggestions that as many as two million workers might be affected.
Since then, the Council of Trade Unions (CTU) and NZNO have been looking into this issue. Our understanding is that the way NZNO members’ hours of work are usually structured means there is a greater likelihood that leave, and pay for that leave, have been calculated incorrectly.
The Holidays Act sets out minimum entitlements to annual leave, public holidays, sick leave and bereavement leave and specifies the calculation for minimum payments of that leave. The calculations are straightforward, but the payroll system must be set up correctly to ensure the right information is used in the calculations and the system must be flexible and robust enough to accommodate changes in employees' work circumstances.
A CTU briefing showed problems can occur at each stage and the likelihood of a problem increased when an employee's pay varies. Two major reasons for variations in pay are fluctuations in hours worked each week, and additional payments on top of normal pay, e.g. allowances. Both these situations are common for our members.
The Holidays Act requires employers to pay ordinary weekly pay or the average weekly earnings, whichever is higher. The payroll system can create a problem if it does not make the comparison between these calculations, but simply pays one or the other.
These two figures – ordinary weekly pay or average weekly earnings – are likely to be the same for employees who work the same hours each week, with no additional payments. But for those whose pay varies, ordinary weekly pay and average weekly earnings may differ quite significantly. The variation may occur because people work a different number of shifts each week, work overtime from time to time, or are paid shift allowances. Because these situations are common for NZNO members, there is an increased risk these payroll errors will affect them.
Problems may also be created when employees change their hours of work and the payroll system uses an hours-based accrual system, as in the following example from the CTU: "A worker who changed their hours of work during the year could discover they had less or more than four weeks' annual holidays when they reached their anniversary. For example, a worker who, halfway through the year, increased their hours from 20 per week to 40 per week, could find they only had 120 hours accrued in a year or three weeks' annual holidays."
A payroll system, incorrectly set up and administered, which used hours-based accrual may also provide the wrong sick leave entitlement. Another CTU example demonstrates this situation: "All workers currently receive an entitlement of five days' sick leave [as a minimum] after the first six months of employment, and then at each subsequent 12-month period of employment beginning at the end of the six-month period, regardless of their full time or part time status. Accrual of sick leave in hours instead of days would mean that sick leave is granted on a pro-rata basis. For example, an employee who worked two eight-hour days a week could find their sick leave cut to 16 hours (or two days leave rather than five)."
The CTU has worked with the MBIE's Labour Inspectorate and has also created a list of questions for employers about how their payroll systems operate. NZNO deals with just over 2000 employers and potentially, all may have these problems with their payroll systems. It is also possible these errors go back many years. Under the legislation, claims for back payments can be made up to six years after the underpayment. Each employer NZNO contacts will be asked to ignore this time limit, if any issues are identified, so members are not disadvantaged. NZNO has also developed plans for each sector and members will be kept informed of progress in identifying and addressing issues.
District health boards
The CTU has forwarded a list of questions to district health board chief (DHB) executives aimed at identifying whether DHB payroll systems are compliant with the Holidays Act. Unions are requesting answers to these questions via local forums. Once we have the relevant information from the DHBs, we will update our members.
Primary health care
NZNO will use the CTU questionnaire and, initially, seek information from national employers, specifically NZ Bloods, Plunket, Offender Health, Family Planning, Healthcare NZ/NZ Care and Homecare Medical Limited.
NZNO will be approaching national providers and other major employers, using the CTU questionnaire. We are also exploring other alternatives, such as working with the Aged Care Association or using provider contractual requirements to seek compliance.
Private hospitals and hospices
The approach in this sector will vary, according to the category of employer. NZNO will contact the New Zealand Private Surgical Hospitals Association to seek help in distributing payroll information. NZNO will emphasise that it is in everyone's interests to cooperate in this process. The association covers around 40 private hospitals, including hospitals with NZNO-negotiated collective agreements, e.g. Mercy Ascot, in Auckland and St Georges in Christchurch. It also covers Southern Cross hospitals.
NZNO will also be contacting hospices and rural community trusts.