The New Zealand Court of Appeals recently clarified the definition of “discretionary” pay under the Holidays Act 2003, concluding that certain bonus payments do not need to be included.
The case, between a glass company and MBIE had the potential fallout of millions of dollars in backpay owed to employees due to faulty holiday pay calculations.
It starts with legislation with worthy intent – to protect workers when they take a holiday. “Modern” Holidays Act legislation, first introduced in 1945, is there to make sure people aren t financially worse off when they take a break. “So if you normally work a lot of overtime, the Act makes sure you get your overtime paid when you are on holiday,” says self-confessed Holidays Act nerd, and Buddle Findlay partner Hamish Kynaston. Same with allowances. Or with sales people on low salaries and high commissions. “If they didn’t get their commissions built into their holiday pay, they could lose a big percentage of their income,” Kynaston says. “There are all sorts of calculations in the Act to make sure you are not disadvantaged when you take a holiday.”