Generous bosses may think of bonuses as a lump sum but it's well established in case law that bonuses are also to be included as gross income to calculate how much employees get when they take annual leave, thereby increasing the amount employees get when they are on holiday.
Under the Metro Glass scheme, employees could get bonuses if they met criteria such as meeting earnings before interest and tax targets, retrofit sales goals and delivering projects on time.
Possible appeal
BusinessDesk asked Metro Glass how many staff were on the scheme and how much money, if any, would need to be repaid as a result of this judgment.
The company would not give specifics but said the amount was provisioned for as a current liability on the firm's balance sheet. Metro Glass was reviewing the judgment and considering an appeal, a spokesman said.
According to the annual reports of the company, the bonuses under the short-term incentive scheme can be significant, varying between 10 percent and 50 percent of a staff member's base pay.
In 2017 for example, the year the labour inspectorate reviewed Metro Glass's pay arrangements, then chief executive Nigel Rigby received $200,000 in short term incentives on top of his $500,000 base pay. This meant that, if he took holidays, he should have been paid out at a rate including the short-term bonus.
Rigby quit the company in 2017 and is now working as executive director of Crescent Capital, the Sydney-headquartered private equity firm that owns rival Viridian Glass.
A full Employment Court bench of Chief Judge Christina Inglis, Judge Joanna Holden and Judge Mark Perkins was resolute in rejecting the firm's arguments, despite the company saying the bonus payments couldn't count as employees' gross income because they were discretionary.
"Metropolitan Glass cannot contract out of the act, so statements that '… bonus payments made under this scheme will not come within the definition of "total gross earnings" for the purposes of holiday pay calculations under the Holidays Act 2003' carry no legal weight."
Avoiding paying
"Metropolitan Glass also cannot avoid responsibility simply by labelling the STI schemes as 'discretionary'," the court said, adding that a 2011 amendment to the Employment Act was created to close down loopholes whereby employers avoided paying holiday pay on variable payments, "which is precisely what Metropolitan Glass is trying to do here."
On the second issue, the court determined that the company should pay employees who have no annual leave but are approaching a closedown period some 8 percent of gross earnings.
The Labour Inspectorate was not immediately available to comment, saying it was prioritising covid-19 related press inquiries.
Metro Glass said in February ahead of the covid-19 lockdown it expected group ebit in the range of $21 million to $24 million and a reduction of net debt of about $15 million.
Since then it said on March 24 that it was significantly scaling down or closing facilities across New Zealand as it was not an essential service. It said it would pay all staff salaries and wages for at least the four weeks from March 26, when the lockdown began.
It has received $6.5 million in wage subsidies to pay 926 employees, according to the Ministry for Social Development's employer search.
