Why do employers get it wrong?

If a holiday pay was paid incorrectly, that is, if a person was paid holiday pay as a casual worker while in fact they were a part-time employee on a regular work pattern, an employer might be required to pay them holiday pay again. In the case considered by the NZ Employment Authority Case last year, Mr. X worked as a truck driver from 21 September 2015 to 16 December 2016. On his resignation, his employer was directed by the NZ Employment Authority to pay him for annual leave entitlements accrued during that period once again, even though the company said it had paid his holiday pay with his wages each fortnight so did not owe him anything more.

Section 28 of the Holidays Act 2003 does allow employers, in two specified circumstances, to pay holiday pay to some workers on such a pay-as-you-go basis. However, the NZ Employment Authority found that Mr. X had not met the requirements that would have allowed the company to pay his holiday pay that way. The company treated Mr. X as a casual worker. Casual are employees whose employment is triggered by an event that cannot be accurately anticipated with no expectation of ongoing employment beyond the event, or whose work pattern can be described as so irregular or intermittent that the concept of four weeks away from work is difficult to apply. In such cases, an arrangement can be agreed to add 8% of the employee’s gross earnings as annual holiday pay to their pay. For these employees, the arrangement must be by genuine agreement and be included in the employment agreement, and the 8% annual holiday pay should appear as a separate and identifiable amount on the employee’s pay slip. On the termination of the employment relationship, no additional pay for annual holidays is due.

However, the documents showed that Mr. X’s work pattern was not intermittent or irregular. Mr Cross typically worked more than 120 hours each fortnight, six days a week, ten or more hours a day. Mr. X’s work pattern did not meet any commonly understood meaning or any special legal definition of being “intermittent” or “irregular”.

28 Subsection 4 states that if an employer has incorrectly paid annual holiday pay with an employee’s pay in circumstances where subsection (1) does not apply and the employee’s employment has continued for 12 months or more, then, despite those payments, the employee becomes entitled to annual holidays in accordance with section 16 and paid in accordance with this subpart.

So, it is a good practice to monitor an employee’s work pattern, and if it becomes regular, consider changing their contracts from casual to part-time ones.