Holiday pay fix costs hit $190 million for Health NZ

Fixing holiday pay miscalculations has cost Health NZ more than $190 million so far

Most current staff have received repayments; payments to former staff have begun

Overall budget $1.8 billion for repayments

Unions criticise the spend on fixing errors and say the process is frustrating; Health NZ says it's complex work

Health New Zealand has spent more than $190 million on fixing errors resulting from holiday pay owed to tens of thousands of current and former workers.

Collectively, Health NZ has budgeted $1.8 billion to repay those affected by the miscalculations.

Unions are scathing at the cost of meeting the repayments, and of the process itself, which has been beset by delays.

But Health NZ says the work is complex and time-consuming, as it requires combing through years of records on the different payroll systems inherited from district health boards.

'Outrageous' delays

Repayments to Health NZ's 90,000 current staff are almost done, with two districts remaining, but many of the 130,000 former staff affected are still waiting. It's expected the final tranche of payments to them will start next year.

Fixing Holidays Act compliance errors hasn't gone smoothly, and payment deadlines have often been pushed back.

NZ Nurses Organisation chief executive Paul Goulter said it wasn't right that staff had faced delays for money they had earned.

"Wherever you go in New Zealand, you'll find a nurse that is totally frustrated, upset and angry by the delays in getting what is a legitimate employment right - the right to be paid for your holidays.

"It's taken years and years and still two significant districts are waiting to get paid out," he said. "It's outrageous."

The latest figures obtained by Checkpoint show Health NZ has spent more than $191m so far to sort the issue.

The biggest spend was $64m on its "remediation partner", followed by $49m on project contractors and almost $38m on staff costs for secondments to the project.

Goulter said the spend on the fix was an eye-watering amount.

"One-hundred-and-ninety-odd million - that's already been spent with contractors, consultants and the like to get this underway.

"Again, our members just look at that absolute amazement and think, with all that money that's been spent still they can't pay out on time."

Executive director of senior doctors' union, the Association of Salaried Medical Specialists, Sarah Dalton said the repayment process was painful for its members.

She was also surprised about the cost of the fix.

"It feels very much like good money after bad. Health New Zealand is New Zealand's largest employer.

"You would like to think that they would be able to build up the expertise and capacity to deal with these issues."

Double checking required

ResolvePay founder and director Jonathan Morgan said the remediation cost appeared high.

"Across their total staff, they've probably got twice the number in terms of historic staff that they're already remediating as well.

"So, the total number of staff is going to be much higher than the 90,000. That being said, you're still looking at $600, $700 per person at that cost, which would be double to triple what we would see in a normal remediation."

ResolvePay had undertaken dozens of Holiday Pay remediation projects.

Morgan said the health sector was the most complicated due to the range of payment arrangements for different staff, and the likes of over-time work.

Putting right holiday pay errors often involved going back through records and double checking everything was paid out correctly, before holiday pay was then calculated.

"In the most complicated remediation that we have done there were 14 different payroll systems, and people moved between the payroll systems," Morgan said.

"Now, in those situations, you're not just grabbing the data from a single payroll system, you've got to essentially create a record for the person across the multiple payroll systems."

For larger pieces of work it was wise to break up the repayments and do smaller groups at a time, to stay on top of issues arising.

Complex work affects tens of thousands

Health NZ executive national director for people, culture, health and safety Robyn Shearer is in charge of the process. She said it was a large piece of work.

"The work originally began in 2016 and 2017 under the district health boards, and the intention was to review payrolls," she said.

Repayment calculations began in 2020-21.

"The remediation work's been under way for many years. Given the scale of the challenge, it's been important to invest money in order for that work to be undertaken.

"It's necessary spending to fix our payroll systems and ensure that our current and former staff get the money that they are owed."

Health NZ isn't naming its "remediation partner" nor the consultants and contractors used.

Shearer did though confirm that no set amount was put aside for the work fixing errors, and that money for the fix was not coming out of the $1.8b earmarked for staff.

"To date we've paid over $882m to approximately 86,000 current employees and 30,000 former employees across the country. That tells you the volume of the challenge and the size and complexity of the work."

That complexity was due to the hours people worked, the variety of employment arrangements and the challenge of extracting information from 24 payroll systems inherited from the organisations merged into Health NZ in 2022.

That meant the repayment programme required specialist skills.

"Each payroll needs to be remediated individually and, with each payment, hundreds of thousands of lines of data need to be checked and reviewed manually before a payment can be made.

"That describes, perhaps, the scale and difficulty of the work that cannot be underestimated

Shearer said work was under way to bring Health NZ under one payroll system. She couldn't put a timeframe on that, but said the present payroll systems required "stabilising" first.