Otago employers have been contacting their accounting professional advisers to ensure they have been paying the correct amount of holiday pay.
Some errors have been discovered during checks during the last few months, Crowe Horwath tax principal Scott Mason said yesterday.
‘‘Our specialist payroll department has been fielding calls and conducting checks.
This issue has been around for quite a while. We have found some issues in some of the payrolls.''
Deloitte Dunedin partner Kyle Cameron told the Otago Daily Times clients had been in contact after reading the headlines about the holiday pay glitch which was affecting thousands of workers around the country.
Like many, Mr Cameron was surprised so many government workers had been caught up in the glitch.
‘‘I am surprised a government payroll product wouldn't be calculating that pay properly. The main thing for employers is using a good payroll system. With the right settings, it should be no problem at all.''
The issue could affect Otago's hospitality industry but clients of Deloitte Dunedin often had more than one bar, were part of a group, and used a high-quality payroll system to ensure they got it correct, he said.
Where there could be problems was a single bar owner-operator who skimped on costs by not using a product which calculated pay correctly.
‘‘But even online payroll products are cheap to use now.''
It would be surprising if many hospitality workers in places like Queenstown and Wanaka went back to their former employers seeking an audit of their pay because of the transient nature of the work.
When those workers left their jobs, they often left the town, Mr Cameron said.
However, those employers who receive requests from employees should realise it was a long process.
To find the average pay for a 52-week period meant receiving 52 weeks of rolling data for every employee which had to be checked against their pay and days worked.
The amount of data to be collected was enormous, he said.
People on salaries could likewise be affected.
If someone was on a salary of $10,000 a month but received a $10,000 bonus at the end of the year, their holiday pay would need to be calculated including the bonus, making it higher than the ordinary weekly earnings.
If people received time and a-half for working particular days, the extra pay calculation would mean holiday pay being higher than the ordinary pay, Mr Cameron said.
Mr Mason said it was clear some payroll software had not been updated when changes were made to the already-complex Holidays Act.
Businesses were relying on the software to do the job but it appeared not all software was up to the task.
Even having two employees take leave on the same day could mean two different calculations.
One could be paid on an average rate for the past four weeks and one could have their pay calculated on a 52-week average.
Annual leave, bereavement leave and study leave meant three different calculations.
‘‘It's a bit rich for the unions to say it is a simple calculation. It is multiple calculations and you have to choose one of them. The average business owner does not have the skills or time to do this''
Asked if the issue would become long-running, Mr Mason said it looked as though it would be now political parties and trade unions were making ‘‘all the noise'' about it.
But he warned the political parties and unions they were dreaming if they believed business owners had set themselves up with the problem on purpose.
Business owners were being forced to deal with the holiday pay problem and were not focusing on the things they should, like economic growth.
That was not good for the country or the employees, he said.
The Polson Higgs tax team told clients it seemed like a good time to review how holiday pay was being calculated and taxed in their business or their client's businesses.
Earlier, it had been reported thousands of people had been getting short-changed on their holiday pay, including the police, who had to back-pay more than $30 million earlier this year to current and former employees.
The Ministry of Business, Innovation and Employment labour expectorate had established out of 20 investigations of other employers completed, holiday pay had been calculated incorrectly for about 24,000 employees.
Although details were limited, the problem appeared to be about employees who had fluctuating pays from week to week, receiving additional pay on top of their normal salary and wages, Polson Higgs tax partner Michael Turner said.
‘‘With some blaming the complexity of the Holidays Act, it seems the risk of underpayments could be widespread in the private and public sector.''
Coincidentally, last month the commissioner of Inland Revenue released an operational position on the calculation of Paye on holiday pay, as that, too, could be an area of uncertainty, he said.
The statement outlined the different tax treatments of holiday pay which might be taxed as ‘‘salary or wages'' or ‘‘extra pay''.
Determining whether a holiday pay payment was one or the other came down to when the payment was made rather than how the holiday pay was calculated, he said.
Extra pays were taxed differently to avoid the overpayment of Paye over the year.
It was important to correctly define what type of holiday pay payment was being made for tax purposes.
That was especially so as many employees who received just salary and wages did not get an assessment at the end of the year to ensure the correct amount of Paye had been paid.
‘‘As a result of incorrect information on the IRD website, it is possible employers may have over- or under-deducted employees' holiday pay.''
The commissioner's statement advised the IRD would not be actively correcting any incorrect deductions before April 1.
If an employer found an employee had been overtaxed, the worker could request a personal tax summary, Mr Turner said.
At a glance
Holiday pay can be calculated two ways.
It is either based on ordinary weekly pay at the start of the holiday or on average weekly earnings over the year.
Employers must pay the higher amount to staff, but have not always been doing so.
