Tens of thousands of teachers and school staff could be owed holiday pay - with $15 million set aside just to investigate the problem.

The Ministry of Education is the latest employer to be caught up by the issue, which stems from law changes to holiday entitlements in 2003.

Budget 2017 has allocated $15.3m over 2017/18 and 2018/19 to investigate underpayments to school staff.

The bill will end up being much larger than that - the $15m will only cover the initial investigation, not any required repayments.


Education Minister Nikki Kaye said it wasn't possible at this point to say how many staff could be affected.

"This issue is not unique to the education sector, and I understand employers across the private and public sector have been working to identify if they're affected, and if so, what actions may be needed," Kaye said.

"The Ministry commissioned an initial review last year which showed the Act had been interpreted in a way that meant some school employees may not have received their correct pay.

"Given the number of employees in the education sector - there are around 2,500 schools which employ over 100,000 staff - it's important to work through this issue thoroughly and give it appropriate resources."

The Ministry of Business, Innovation and Employment (MBIE) has worked to fix its payroll after it was revealed that some of its 3000 staff had been paid the wrong amount in holiday entitlements.

The issue has also affected New Zealand Police, at a cost of $30 million.

The problem stems from law changes to holiday entitlements in 2003.

A common mistake has been in calculating pay rates for annual leave. The Holidays Act requires paying workers either at their current pay rate when they take leave or at the rate of their average weekly earnings over the previous year, whichever is higher.


Many payroll systems simply pay leave at a worker's standard hourly rate, without averaging actual earnings over the previous year including overtime, extra pay for statutory holidays and non-discretionary bonuses.

Pay problems

• A number of payroll systems have incorrectly calculated holiday pay owed to some workers because of changes to the Holidays Act in 2003.

• The Ministry of Education will spend $15m just to investigate size of problem, and cannot yet say how many teachers and school staff are owed money.