Relevant daily pay still bites

Relevant daily pay still bites

While the sick leave provisions of the Holidays Amendment Bill have drawn a lot of comment, there is an underlying issue that is more significant and which will put major costs on to many businesses - relevant daily pay.

Business NZ Chief Executive Simon Carlaw says the concept of relevant daily pay was first introduced into the holidays legislation that became law earlier this year.

"The concept was put into the legislation by the select committee, fairly late in the piece, without any consultation. Had there been consultation on the issue, then the problems with public holidays may never have arisen.

"The problem is that relevant daily pay has replaced ordinary pay as the basis for calculating payment on public holidays - and that substantially magnifies the costs for many employers.

"Relevant daily pay (which can include extras like incentive, overtime and other payments) is still to be used as the basis for calculating payment for public holidays, alternative holidays and sick or bereavement leave. As all these are instances of non-productive time, ordinary pay would be more appropriate. Ordinary pay was the accepted payment basis for more than 50 years, before the select committee's actions last year.

"By continuing to require relevant daily pay instead of ordinary pay as the base rate for calculating payment for public holidays, the Government is increasing wage costs for many employers. A number of companies in manufacturing, healthcare, transport and other sectors have calculated their annual increase in the millions of dollars.

"Relevant daily pay also creates a perverse incentive - it means an employer can't pay an employee more for working than for not working. There is still the financial incentive for employees to take a sickie on days when the pay is highest."

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