05 Nov O Holidays Act, how do I hate thee? Let me count the ways
Blog #4 in our series on the Holidays Act
We’ve got a long list of gripes with the Holidays Act: inconsistencies, unfair calculations, high compliance and complexity. Some of these issues have been raised by the parties mentioned in the previous blog post. But we’ve got a list of our own.
One principle that we’d like to see enshrined is that someone with only paper and pen should be able to do any of the leave (or for that matter, tax) calculations for their business. If it’s not practicable for me to maintain the information required and carry out the calculations with a paper wage book then the rules need to be changed.
Now, we provide software to handle the complexity of those calculations so for us, the more complex the calculation the better – the more demand for our product. We get a lot of business from companies who aren’t too worries about the tax calculations, but are just wanting to use a payroll system for the leave calculations.
On the other hand, we see the frustration, confusion and costs caused by the complexity of the rules, even when we’re doing everything we can to help.
For the next two blogs I’m looking at the Average Daily Rate used for BAPS (Bereavement, Alternate, Public Holidays, Sick).
The first rule for these holidays is that you pay the Relevant Daily Pay. That means if you know what someone would have got paid had they worked that day, then that’s what you pay them. No complaints about that – it makes perfect sense.
But in an increasing number of cases nowadays, this is ‘impossible or impractical’ to calculate, so you must use the Average Daily Pay – the last 12 months total of earnings, divided by the number of work/leave days in that period.
The first thing that’s wrong with this is the rolling 12 month window. Imagine someone with a paper based system keeping 52 weeks of earnings and work/leave days, then adding them up every time someone took a sick day!
The rolling 12 month totals are also used for annual leave rate calculations – the Average Weekly Earnings calculation. As with the majority of software companies (and as recommended by the NZPPA) we do annual leave calculations in hours. So in addition to the earnings and days worked, we also need to keep track of hours.
Even using good payroll software there’s a cost to the 12 month rolling totals. You need to ensure you accurately record the earnings, hours and days with each pay. Earnings and hours – not really a problem. But days? These don’t affect the pay at all and are just an extra piece of information you need to gather and one more opportunity to get wrong. And it’s very easy to overlook this piece of data.
And if ever you decide to change payroll systems, what a nightmare! Somehow you need to get 12 months of pay history – earnings, hours and days – into the new system.
When converting to FlexiTime, we can provide you with a spreadsheet to load this information into (assuming you can get it out of your existing system). Or if you’re converting from MYOB, this historic pay data is included in the load. But these one-off historic data loads are one job we’d rather not have to do.
In the next blog we’ll look at how coming in to do a little bit of overtime on Saturday can work to your detriment because of the way the Average Daily pay is calculated.