Health NZ eyes $1.8b cost for unpaid leave dating back 15 years

More than $334m has already been paid out to rectify some of the errors. Photo / RNZ, US National Cancer Institute

By Jimmy Ellingham of RNZ

• Health New Zealand has spent over $130 million fixing Holidays Act compliance errors, in addition to $334 million already paid out.
• The total owed is about $1.8 billion to 220,000 past and present staff for backpay.
• Payments to current employees are expected by the end of 2025, with delays reported by unions.

Health New Zealand has spent more than $130 million fixing errors with Holidays Act compliance, on top of the more than $334m it has already paid out for those errors.

In total, it owes about $1.8 billion to about 220,000 past and present staff – such as doctors, nurses and healthcare assistants – in backpay, stemming from the act’s complicated requirements.

That comes at a time when there is unprecedented pressure on the health budget.

Eight years ago, compliance problems were discovered in the payroll systems at the 20 district health boards that merged into Health New Zealand in 2022.

The errors stretched back to May 2010 and meant some employees weren’t receiving their proper leave entitlements.

Health NZ confirmed on Monday it expected the errors to cost about $1.8b – and last month it had paid out more than $334m.

Now, information obtained by Checkpoint shows that, until the end of September, the organisation had spent almost $130.1m on fixing these errors – money that doesn’t go to staff affected by the payroll system errors.

About $44.4m was spent on a “remediation partner” on the project to work through and correct the errors, $34.4m on project contractors, $26.4 on staff costs, such as those seconded to the project, $13.7m on consultants and $10.7m on “payroll system vendor costs”.

Health NZ said it would complete payments to 90,000 present employees by the end of 2025, but workers’ unions are reporting delays in the process. Health NZ will start working on payments to 130,000 former staff this year on a region by region basis.

Then-current “Auckland metro” staff were paid in mid-2023.

On Monday’s Checkpoint, Health NZ northern region deputy chief executive Mark Shepherd refused to name which consultants and contractors had received most of the $130m.

He said the work involved the likes of payroll experts, who were fixing systems to make them compliant, and that had so far happened in 15 out of the 20 payroll systems.

“This is an incredibly complicated project, where we’re trying to return the money that’s really deserved and owed to our staff.

“There’s $1.8b that we’re trying to organise.”

Health NZ interim chief human resources officer Fiona McCarthy said it inherited 20 different payroll systems from district health boards.

“Each payroll was set up differently, with different practices and local arrangements in place, and a majority were no longer suited for modern payroll requirements,” she said.

“The complexities of the Holidays Act, the size of the workforce, the hours people work and the variety of employment arrangements, as well as the state of the payroll systems and processes, all make this a very challenging programme of work.”

New Zealand Nurses Organisation delegate Tracy Chisholm said she understood the way the process was being dealt was reviewed when the Government changed in 2023, so she wondered if there was duplication in that $130m spend.

“It makes a mockery of the statement, ‘There’s no more money for health’. It makes a mockery of, ‘We have a limited budget’.

“It makes a mockery of, ‘We can’t afford to give you any more than maybe an up to 1% pay increase, but over the last how-many years, we’ve spent $130m on correcting errors that we’ve made’, so you can correct your own errors, but you can’t actually pay the staff that are currently employed.”

Chisholm said the dates staff were told they’d receive their Holidays Act entitlements were often pushed back.

Eye-watering amount to diagnose problem

An Association of Salaried Medical Specialists spokesperson said $130m was an eye-watering amount just to diagnose a problem. The association represents senior doctors, who went on strike over pay and conditions late last month.

The spokesperson said the $130m was “a direct result of underinvestment in infrastructure – in this case payroll infrastructure – and a failure to tackle the legacy of 20 separate DHBs”.

“That money could’ve been much better spent. It is unclear whether Te Whatu Ora is learning the lesson – the failure to invest today will come back to haunt them tomorrow.”

The spokesperson also said staff had experienced estimated dates for remediation payments getting pushed back, in some cases four to five times.

“After spending $130m, employees expect something more conclusive from their employer.”

Malcolm Mulholland from Patient Voice Aotearoa was shocked at the $130m spend, but said it highlighted the complications of Holidays Act requirements.

“That is a total waste of money. We should not be spending $130m on correcting an error – effectively, that’s what’s happening.

“That’s money that could be much better spent within our health system, [which is] crying out for dollars at the moment, when it comes to things such as an increase in doctors’ wages or infrastructure.”

– RNZ