More than $3 million dollars is being paid out to Kiwis who lost their jobs during last year's national lockdown after an emergency law change blunder led to thousands of unemployment benefits being miscalculated.
The Ministry of Social Development has confirmed that 5,300 people who applied for Government financial support between March and June last year had the wrong calculations used to determine when their benefits could begin.
The Government department was now paying out $3.166 million in money owed to current and former Work and Income clients as a result of the error.
In a letter sent to the thousands affected by the underpayment, the ministry has apologised, saying it is "very sorry for this error and for the impact it has had on you".
Group General Manager – Planning and Change Jo Herewini said the "high-level error" occurred when regulations to the Social Security Act were changed last year as part of the Government's rapid emergency response to Covid-19.
Between March and June last year 43,810 applied for the Jobseeker benefit with up to 1000 people a day applying for assistance at the peak of lockdown.
Herewini said the amendment was intended only to cover the initial stand-down period.
"The intention was to allow a rapid start to benefit payments by removing the one-to-two week stand-down," said Herewini.
But an error in drafting the regulations unintentionally captured all stand-downs, including taking final work payments such as holiday pay and outstanding annual leave which were normally treated as weekly income. Benefit payments are usually timed to begin when these final work payments run out.
"It removed our legal powers to take any final work payments into account when calculating when someone's benefit payments should start," said Herewini.
"As a result, 5,300 benefit applicants who received holiday pay, sick pay or pay in lieu of notice were legally entitled during this time to begin receiving benefit payments earlier than they did.
"We have identified these clients and are paying them the extra money they are legally owed. In total, $3.166 million is owed to current and former Work and Income clients as a result of this error."
The average amount owed was $577.38 per person, but at least one former client, who lost their job in the first week of the March 2020 lockdown, had received a four-figure payout.
Herewini said those affected by this error were granted benefits between March 23 and June 8 2020.
The error was identified and remedied early in June last year, and the department's usual powers to take final work payments into account were reinstated.
Herewini said those calculating jobseeker benefits had no idea they were doing it incorrectly.
"Prior to its removal, our frontline staff were not aware of this high-level error. They continued to process benefit applications based on their understanding of Government policy, and continued to take final work payments into account when determining how long an applicant's stand-down period should be."
She said earlier this month letters were sent to current and former clients who were affected, letting them know what happened.
One former Work and Income client who received the back payment said it was a welcome surprise but would have been more useful when her workplace closed without warning and the prospect of getting a job during last year's lockdown looked grim.
"One week I had a well-paying job and the next I was calling Winz, applying for a benefit. It was the first time I'd been unemployed so when the call taker said I wasn't eligible for any payment for weeks I accepted it."
While she managed to get employment three months on she said having any money at that time was something to be grateful for.
"When the income you rely on disappears overnight you go into survival mode. It is stressful. I had the resources to weather the storm but I know it took a toll on many others who were in a far worse position than I was."
Herewini said not all clients were receiving all types of assistance, and the amount owed varied depending on individual circumstances. Some people were only affected for one day.
Back payments included the main benefit, accommodation supplement, disability allowance, temporary additional support and winter energy payment.
So far $1.24 million had been paid to 1929 current Work and Income clients.
Former clients were able to fill out an online form on the ministry's website to check if they were owed any money. Payments would be scheduled once eligibility and account details were confirmed.
The one-to-two week income stand-downs removed during the first Covid crisis were reinstated from July 25 this year.