Public Holiday Pay: The Mistakes You Might Be Making and How to Fix Them

November 2, 2023by Crystal Payroll

Public Holiday Pay: Think You’re Doing It Right? Think Again.

Public holidays aren’t always just days of relaxing; for some, it means a headache of having to change up how they process their usual payroll. Employees working on these days have rights to certain benefits, and for businesses, ensuring accurate public holiday pay is both a legal and ethical obligation.

While many assume that public holiday pay is a straight-forward process, the reality is that there’s a lot more to it than meets the eye. The multitude of regulations and subtle details can mean it’s all too easy for businesses to overlook key details when processing their payroll. If you’re confident that your payroll is 100% compliant, the Wendco case might make you reconsider. 

Wendco, the franchisee of the American fast-food chain Wendy’s in New Zealand, offers a lesson in the complexities and potential pitfalls of public holiday pay. This case underscores the importance of understanding and correctly implementing public holiday pay regulations. It’s a call to action for all businesses to review their practices, ensuring they’re not just ticking boxes, but genuinely upholding the rights of their employees. Keep reading to discover why getting public holiday pay right is more crucial than you might have thought.

The Wendco Case: Why you should be cautious with your public holiday pay

In 2015, Wendco (NZ) Limited, a franchisee behind the popular American burger chain Wendy’s Hamburgers with 23 outlets in New Zealand, faced scrutiny following an “Improvement Notice” issued by Labour Inspector Kim Baldwin. The investigation was triggered by employee complaints, suggesting they weren’t receiving their due alternative holidays for working on public holidays. Baldwin looked into Wendco’s employment practices, particularly at their Hornby restaurant, and combined her findings with an audit from another Labour Inspector at Wendco’s Paraparaumu location. The central issue revolved around whether Wendco’s method of determining “usual working days” during public holidays was in line with the Holidays Act 2003.

Wendco’s Missteps: Where They Went Wrong

The company failed to pay some of its employees for working on public holidays and did not provide others with their entitled alternative holiday or “day in lieu.” Their method, dubbed the “three-week rule”, was a straightforward approach: if an employee worked on the same day of the week for three consecutive weeks, then that day was deemed a regular working day for public holiday purposes. While this might sound like a practical solution, it was far from compliant. Such an approach, while convenient, might not always align with the legal requirements of the Holidays Act 2003. Tania Donaldson, the Labour Inspectorate’s Payroll Lead, emphasized that determining if a day is an “otherwise working day” requires a practical, case-by-case approach. Factors like employment agreements, usual work patterns, rosters, and other relevant considerations play a pivotal role.

Upon further investigation, the Employment Relations Authority (ERA) recently found that Wendco failed to pay some of its staff for working on public holidays. This breach was particularly evident around the “Mondayisation” of public holidays in late December 2020 and early January 2021. 

This case underscores the importance of understanding and correctly implementing the provisions of the Holidays Act 2003. As Tania Donaldson, Payroll Lead, aptly pointed out, “Employers who configure their payroll system in a way that is convenient to themselves without proper regard to their obligations run a high risk of being non-compliant.”

Wendco’s Consequences: Paying the Price for Non-Compliance

Upon realization and subsequent investigation into the breaches, Wendco had to undertake several corrective measures:

  • Review of Public Holidays Worked: Wendco was instructed to conduct a thorough review of all public holidays worked by past and current employees since July 2012. This was to determine if the public holiday was an “otherwise working day” for the employee.
  • Compensation for Affected Employees: For employees who had worked on a public holiday that was determined to be an “otherwise working day”, Wendco had to credit them with an alternative holiday. For former employees who had not taken their alternative holiday before their employment ended, Wendco was required to make a monetary payment for the alternative day.

Estimates suggest that Wendco could be looking at a cost of around 16,500 days or $1.6 million worth of leave – a high price Wendco might pay for its misunderstandings of the Holidays Act. It reiterates the importance of having thorough understanding of the Act and the necessity of having accurate payroll processes in place to avoid such costly financial setbacks.

The Proper Process: What Wendco Should Have Done

To ensure compliance with the Holidays Act 2003, businesses, including Wendco, should take the following steps:

  • Determine “Otherwise Working Days” Individually:
    It’s not enough to apply blanket rules when it comes to public holiday entitlements. Each employee’s situation is unique, and businesses should assess this on an individual basis. For instance:
    • Sarah, who works a regular Monday to Friday job, would consider a public holiday falling on a Monday as an “otherwise working day” since she typically works on Mondays.
    • John works in a restaurant with a rotating roster. He doesn’t have fixed days, but he’s been scheduled to work every Saturday for the last two months. A public holiday falls on a Saturday. Given his recent work pattern, that Saturday would likely be considered an “otherwise working day” for John.
    • Determining an “otherwise working day” requires a practical approach, considering factors like employment agreements, usual work patterns, rosters, and other relevant circumstances. It isn’t always enough to only check if they’ve worked three out of four most recent week days.
  • Understand and Implement Mondayisation:
    The Holidays Act 2003 introduced the concept of “Mondayisation”. If a public holiday falls on a weekend, and that day would not otherwise be a working day for the employee, the holiday is transferred to the following Monday (or in some cases, Tuesday). For businesses, this means ensuring that employees receive their rightful entitlements even if the public holiday is “Mondayised”.
  • Configure the Payroll System with Precision:
    A compliant payroll system is one that’s set up to align seamlessly with the legal obligations of the Holidays Act 2003. This goes beyond just the basic calculations. It means avoiding shortcuts or configurations that, while convenient, might lead to non-compliance. The system should be robust enough to handle the intricacies of public holiday pay, especially for employees with irregular work patterns.
  • Regularly Review and Update Processes:
    Compliance isn’t a one-time task. As legislation evolves and company operations change, businesses should be proactive in reviewing and updating their processes. This ensures that they remain compliant and that employees receive their rightful entitlements.

Compliance Confusion: When Clear-Cut Laws Aren’t So Clear

We would all like to hope that following the rule book should be simple enough to stay compliant, but unfortunately the rules aren’t always clear cut.The legislation, while providing guidelines, does not make it easy for businesses to determine what constitutes an “Otherwise Working Day.”

To understand the challenge, let’s break down the factors that legislation ask to be considered:

  • The Employee’s Employment Agreement: This serves as the foundational document that sets out the terms of employment, including workdays and hours.
  • The Employee’s Work Patterns: This considers the regularity and consistency of the employee’s work schedule.
  • Other Relevant Factors: These can vary and include:
    • Whether the employee works only when work is available.
    • The employer’s rosters or similar systems in place.
    • The mutual expectations of the employer and the employee about the likelihood of the employee working on the concerned day.
  • Special Considerations: It’s crucial to evaluate if the employee would have worked on a specific day if it wasn’t a public holiday or a day of leave.

Yet, the legislation does not rank these factors in terms of importance or relevance, which adds a layer of uncertainty.

The MBIE’s Otherwise Working Day Calculator

Recognising the complexity, the MBIE (Employment NZ) created a tool to help businesses and employees: The Otherwise Working Day Calculator. However, even this tool can still give an answer of “Possibly Otherwise a Working day”, which asks you to discuss with your employer to reach an agreement on compensation. It also does not guarantee to work for all situations, so employers and employees must be careful to ensure all factors that determine an otherwise working day are considered.

The Importance of Compliant Payroll Software: Lessons from Wendco

The world of employment legislation is intricate and ever-changing. As the Wendco case has shown, businesses that don’t prioritize payroll compliance can find themselves in hot water. However, the right tools, like compliant payroll software, can make all the difference.

Benefits of Compliant Payroll Software:

  • Accuracy: Eliminate manual human errors that can lead to costly mistakes.
  • Efficiency: Automated calculations save time and reduce the workload.
  • Compliance: Stay updated with the latest legislative changes and requirements.
  • Peace of Mind: Know that your employees are receiving their rightful entitlements.
  • Cost Savings: Avoid potential fines and legal fees from non-compliance.
  • Employee Satisfaction: Ensure timely and accurate payment, boosting morale and trust.

What to Look for in Payroll Software:

  • Up-to-date with Legislation: The software should be regularly updated to reflect the latest legislative changes.
  • Customizable: Cater to both standard and non-standard working patterns.
  • User-friendly Interface: Easy navigation and clear instructions.
  • Robust Reporting: Detailed reports for transparency and audit purposes.
  • Support & Training: Access to expert guidance and training resources.

Public Holidays Always Paid Right – with Crystal Payroll’s New Statutory Pay Calculator

Crystal Payroll ticks all the boxes of a NZ compliant payroll system. But that’s not all – recognising the challenges of compliant payroll processing when it comes to public holidays, Crystal Payroll has rolled out its Statutory Pay Calculator. This new nifty feature simplifies the task of determining public holiday pay, especially for those with fluctuating work schedules.

Why is this feature essential?

For employees with regular weekly schedules, holiday pay calculations are a breeze. But for those with irregular schedules, it can get a lot more complex. Crystal Payroll’s new tool is tailored to tackle this complexity head-on.

For many, the new pay calculator will bring a sense of clarity. One significant point to note is paragraph 78 of the Wendco case law emphasizes the employee’s work pattern as the most pivotal factor in most scenarios. If an employee’s work pattern aligns with criteria such as “2 out of 4 weeks,” “6 out of 13 weeks,” or “13 out of 26 weeks,” employers can gain some level of confidence that this is considered an otherwise working day for the employee. Paying out based on these structures is often viewed as generous to the employee and can serve as a safeguard for businesses.

How does it work?

Drawing insights from both case law (Such as the Wendco case) and the Holidays Act 2003, the tool assesses an employee’s work pattern over the past 4 weeks. It then cross-references this with a broader timeframe, spanning 3 to 6 months, ensuring a precise determination of holiday pay entitlements. 

For instance, if you have an employee who sporadically works on Mondays with varying hours, the Statutory Pay Calculator will pinpoint their holiday pay eligibility and calculate the exact amount due. This feature takes the guesswork and manual labor out of holiday pay calculations. No more sifting through employee work histories or tabulating hours: Crystal does the heavy lifting for you.

With a few simple clicks, businesses can ensure compliance and fair compensation for their employees. No more blanket rules or guesswork—just precise, compliant payroll processing.

Disclaimer: This blog post is intended for informational purposes and should not be considered as financial or legal advice. Always consult with professionals for tailored guidance.

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