DHB payroll breaches: Government rules out interim payouts for DHB

By Phil Pennington of RNZ

The Government has put the kibosh on hopes hospital workers owed three quarters of a billion dollars could get an interim payout early.

The 20 boards and the Blood Service owe more than 150,000 staff and former staff an estimated $750 million due to payroll miscalculations stretching back a decade.

Unions had expectations an interim payout might be looked at.

Officials had raised the idea - they "just posed the question", said senior doctors' group, the Association of Salaried Medical Specialists (ASMS) executive director Sarah Dalton.

"Might there be some kind of interim solution to tide people over?"

However, Health Minister Chris Hipkins late yesterday ruled out interim payouts.

"That's not something that I'm currently considering," he said.

"The Government's very much focused on making sure that when we do resolve the issue, we're resolving it once and for all, we're not just doing something that's a stopgap measure."

It is now about seven years since DHBs realised their payroll systems were breaching the Holidays Act.

They were in charge of sorting out liabilities under the Holidays Act, but Hipkins doubted the boards would consider interim payments either, as they wanted a comprehensive solution too.

'Still miles away'

The date for arrears payments keeps shifting backwards, nettling the Council of Trade Unions (CTU).

"We're still miles away from getting money in people's hands," CTU head Richard Wagstaff said.

"We should be exploring whether or not there are other ways of getting at least some of that money out quicker - we're up for the conversation.

"Maybe there's some simple ways of getting something out initially, because there's a lot of money just sitting there."

Dalton of the ASMS said the question was whether an attempt to try to find an interim payout approach might distract from the overall solution.

DHBs assumed remediation would be finished in the previous financial year, 2019-20, but that would not begin until this year, the Health Ministry said.

Even those boards that are furthest advanced on fixing this - the three in Auckland - are only just putting out a tender aimed at paying arrears by mid-2022.

The Association of Salaried Medical Specialists had hoped for a first payout within six months from now.

But the support company for all DHBs, TAS (Technical Advisory Service), told RNZ in a statement that "we expect remediation to begin in the first DHBs before the end of next year".

It was the biggest Holidays Act correction in the country, covering six payroll providers with a payroll budget in excess of $7 billion a year, it said.

"Everyone involved wants to make sure this is put right," TAS said.

The $750m estimate of what is owed dates back to late last year, and is based on a sampling of as few as 1 per cent of cases; a new estimate will only be available from updated DHB audited accounts at the end of October.

Minister Hipkins acknowledged the growing financial pressure this put on boards.

"There's a substantial historical liability there," he said.

"And, of course, the longer it goes unresolved, the more that that outstanding liability grows ... which is one of the reasons that we want to get it resolved as quickly as we can."

At Canterbury DHB, the chief executive, David Meates, resigned yesterday.

RNZ asked the minister if the financial pressure including from fixing payrolls might have played a part in the resignation, but Hipkins said he did not think so.

No to a staged fix

The Government had looked at various approaches to pay arrears, "including whether or not this could be dealt with in stages".

But "there's still a lot of work to be done before we're in a position to, to consider any payments" to workers, Hipkins said.

The approach is complicated by DHBs individually sorting this through - as well as having joint talks with unions and the ministry and having six different payroll systems, and different approaches depending on whether they have called in expensive consultants like EY, are relying on TAS, or have turned to local accountants for help.

The ministry puts it back on the boards: "The DHBs are responsible for their remediation projects and also for estimating their liability," it said.

Asked about an interim payment approach, the ministry said the tripartite Health Sector Steering Group it was on "agrees that it is important that employees are paid what they are owed and have been having discussions about how to progress this work".

The CTU demanded better.

"The time it's taking may mean that many people will never see what they're owed, because it takes too long and they're too hard to find," Wagstaff said.

David Wait of the Nurses Organisation wanted an end to the waiting game.

"We've been waiting for safe staffing for over a decade," Wait said.

"We've been waiting for pay equity. Now we're waiting for Holidays Act remediation, which is money that our members have actually already earned, but aren't being paid.

"It's time for them to sort this out."

He questioned if enough resources were being put into it.

The DHBs face an additional huge cost and effort: To overhaul or replace the payroll systems themselves that have been spewing out wrong calculations for years.

And on that front, other complications loom:

• A long-delayed rewrite of the Holidays Act that could tweak or change the law substantially.
• A government push to centralise payroll.

On the former, Workplace Relations Minister Andrew Little said he had commissioned further advice from officials on what response the government would give to the Holidays Act Taskforce's review.

"I expect to receive this [advice] in the coming days, with the response being released shortly thereafter," Little told RNZ.

As for centralisation, the aim was to "establish all-of-government contracts with suppliers" and "adopt a common payroll process that reflects good practice", said the joint group working on this.

Some industry players suspect the Government's ideal is to have a single payroll systems provider across the whole core public sector, and perhaps a single payroll provider covering all DHBs, a little like Novopay covers schools.

The All-of-Government Payroll Programme is partly about assuring ministers that expensive upgrades of systems to cope with the Holidays Act do not waste money.