Unite targets fast food employers in Holiday Pay breach

Unite targets fast food employers in Holiday Pay breach

Unite is writing to all the major fast food companies today to seek a reassurance they will now comply with the law.

We wrote to these companies almost a year ago seeking their cooperation in fixing what seemed an obvious problem.

They all tried to deny they were breaking the law.We also wrote to MBIE in July last year asking what their advice was to companies who used these type of calculations for annual leave.

Underpayment of workers’ holiday pay appears to be routine.


Most major companies we deal with, including those in security, cinemas, and fast food appear to calculate their workers annual leave pay only as a certain number of hours.

The hours of holiday leave that these companies calculate that they owe their workers is recorded on payslips. 

The workers then apply for and receive a certain number of hours when they take annual leave.

But this method of calculation does not comply with the law and workers are being cheated out of their entitlements.

The Holidays Act says that during the one year period after you start work for a company you “accrue” annual leave at the rate of about 8% of your pay. In most situations this is recorded as a certain number of hours on your pay slip. If you leave the company before the year is up this accrued leave has to be paid to you.

However, after a year, the leave becomes an “entitlement” to four weeks annual leave.

You then begin “accruing” annual leave again for the next year, which becomes an entitlement again at the anniversary date of your employment.

The “entitlement” leave should be recorded as a weekly entitlement. But many companies continue to simply calculate leave as a certain number of hours. They also often mix up the hours that are part of your “entitlement” with those that are “accrued” in a single number.

Companies that do this are those that have workers who work irregular hours from week to week. It is simply easier (and cheaper) to do it that way. But it is unlawful and results in many workers being underpaid their holiday leave.

This is because when leave becomes an “entitlement” of four weeks the company is obliged to calculate leave by using the higher number of either the average weekly pay of the previous year or the average of the previous four weeks.

Workers who begin work in a fast food company will often be working more average hours at the end of the year before they take their leave. They may start working 10 hours a week and finish the year working 30 hours a week.The average may be 20 hours a week but the holiday pay entitlement should be calculated at the 30 hours a week they are working in the month before they take their leave.

Most companies simply do not do this double calculation.

We challenged a security company on the issue last year and they accepted that they were in the wrong legally and agreed to recalculate everyone’s leave. Unite got $17,000 back pay for around 60 members.

We are also concerned that many big companies allow staff to top up their meagre wages from week to week using the "hours" of annual leave they have owing. This can include leave that is "entitled" as well as accrued. Many workers end up with no proper annual leave holiday as a consequence. 

These companies know what they are doing. Payroll companies also know what they should do. We have been told by one of them that they can do the calculation for their clients but the companies they provide services for are happy not to comply.

We expected to have to go to court for a final resolution of this issue with the fast food giants. We are pleased that MBIE has acted and this may not be necessary.