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.

Simplifying Public Holiday Payroll: Our New Feature 

One of the hardest aspects of payroll is keeping integrity and compliance with legislation. Specifically, if you employ individuals with non-standard working patterns, determining their eligibility for statutory pay can become a challenge. As Labour Day has just passed, we’re excited to introduce a new tool – the Statutory Pay Calculator –  a new tool to help determine both the eligibility of an employee with irregular working hours for public holiday pay and calculate the exact amount they’re due. Let this new tool make your Labour day payroll even more compliant and simple.

It’s straightforward to figure out the holiday pay for employees with consistent weekly schedules.

Regular Working Pattern:

Suppose you have a 40-hour-per-week employee who always works 8 hours every Monday. If they take Labour Day off, they should still receive pay for their usual 8 hours while getting to enjoy their holiday.

However, when employees don’t have the luxury of a regular working pattern. Determining the entitlement and what is to be paid to the employee becomes much more complicated due to the unpredictable working pattern. 

Irregular Working Pattern:

Consider an employee who occasionally works on Mondays, with varying hours each time. Deciding if they qualify for holiday pay—and if so, how much—becomes a complex task.

How we designed it to be fully compliant

Our latest tool incorporates both case law and provisions from the Holidays Act 2003. By default, it evaluates an employee’s work pattern over the past 4 weeks and cross-references it with a broader range spanning from a minimum of 3 months to a maximum of 6 months. This ensures an accurate determination of holiday pay entitlements.

Set up is simple

For a detailed walk-through, watch our in-depth video on the feature and its setup.