The country’s now-scrapped district health boards spent $25 million on consultants – more than half with industry favourite EY – over the past four years to fix issues with the Holidays Act.
Yet underpaid nurses, doctors and other health workers aren’t expected to be recompensed until next year – eight years after problems were discovered. There’s no set timeline for determining how much ex-staffers are owed.
Unions put the delay down to, at least in part, the stubbornness of some health bosses. They say taking this long to sort out overdue holiday pay just adds to their members’ feeling of being under-valued.
Issues with payroll systems not complying with the Holidays Act were first identified in 2015. The following year, DHB bosses agreed a national process but then set about establishing their own project teams to review the problems, rectify them, and pay what’s owed.
In 2019, the then Health Minister David Clark said current and former staff had been short-changed for a decade and “this Government is putting things right”. Reviewing and rectifying the “historic issue” – that’s Labour pointing the finger at the National Party – would take up to two years.
Clark’s 2021 deadline passed with barely a mention, as the Government announced it was establishing a new national health service, with a Māori Health Authority alongside. Holidays Act liabilities, meanwhile, had reportedly reached $1 billion.
In June, before district health boards were scrapped, Newsroom asked each DHB how much they had paid external contractors for work arising from the Holidays Act in the last five financial years.
Four months later, in October, Te Whatu Ora/Health NZ responded, setting out $25 million in payments over four financial years to 64 different contractors.
The lion’s share – $17.1 million – was paid in the last financial year, which ended in July, and $10 million of that was paid to consultancy firm EY. Over the four years, EY has received a total of $13.6 million, cementing its place as the consultancy of choice for DHBs, on top of its work leading the health sector transition unit.
(Asked for comment, EY’s Australian-based external communications manager, Melanie Kent, says via email: “No comment from us.”)
Only three other firms – Staples Rodway Taranaki ($1.35 million, Taranaki DHB), Beyond Recruitment ($1.04 million, Mid Central, and Capital & Coast/Hutt Valley/Wairarapa), and Venture Consulting ($1.02 million, Southern DHB) – have earned over $1 million for Holidays Act work.
What has been done?
An in-depth review of payrolls, non-compliance dating back to May 2010 has been identified, consultants have worked with payroll providers to reconfigure systems, and identified which policies and processes needed to change to ensure future compliance.
Above all, accurate leave payments have to be calculated. On that last point, Te Whatu Ora’s interim lead of HR operations, Elizabeth Jeffs, says: “This requires a line-by-line review of leave payments made to the 270,000 current and former employees who are covered by the work.”
Project teams are “working to make any payments or be on a pathway to make payments to current staff” by June next year, she says. After that, payments owing to former employees will be considered.
“It could take some time before all the historic employees are paid and the timeframe for this is currently unknown pending further project work.”
In normal times this situation would be frustrating enough. But the health sector is struggling with staff shortages, overwhelmed hospital emergency departments, and long backlogs for planned, non-urgent surgeries.
Sarah Dalton, executive director of the Association of Salaried Medical Specialists, says of the Holidays Act issue: “It’s another thing that pisses them off, to be honest, about working in a broken system.”
The legislation isn’t as complicated as people make out, she says. It’s made more complex when DHBs buy unsuitable “off-the-shelf payroll products from overseas”. The various payroll systems had different faults.
What has made things worse, Dalton says, is disagreements between unions and employers over “such fascinating topics as: what is a week?”.
“We have found some of the attitudes of senior people from DHBs, now Te Whatu Ora, mulish and stubborn … about a number of these issues, and a refusal to engage, and we’ve actually had to go to mediation over trying to resolve some of those issues.”
Noreen McCallan is a registered nurse at Hawke’s Bay Hospital. She spoke to Newsroom as a union delegate for NZ Nurses Organisation in Te Matau a Māui.
Six years into resolving this issue it’s something McCallan’s asked about every month, if not every week.
“We feel disrespected, we feel undervalued, we feel that it’s just not important enough to go to the top of the list, that’s why it’s taken six years.”
Many health workers have moved around the country or shifted overseas since 2016.
“They feel like they don’t know if they’re ever going to get paid money which they’re entitled to get.
“The members are feeling very frustrated, they’re angry, and they want it sorted – and we want to be hopeful and believe that it will be sorted in June.”
McCallan says it’s unacceptable for Te Whatu Ora not to put a timeframe on payments for former staff. “There’s no faith that they will get paid.”
Dr Stephen Blumenfeld, director of University of Victoria Wellington’s Centre for Labour, Employment, and Work, says $25 million seemed like a lot of money for this work, and it’s surprising such expertise doesn’t exist within public health.
But he understands the need to get the calculations right: “Even if their consultants find that they don’t owe anybody any money whatsoever they still need to go through that to actually determine that.”
Meanwhile, Professor Robin Gauld, the director of Otago University’s Centre for Health Systems, says in the context of an annual payroll in the billions of dollars, $25 million wasn’t a huge amount.
Compliance issues may involve legal, tax, HR and IT specialists. “It’s a very complex area.”
But he, like Blumenfeld, laments such skills and expertise aren’t readily available within government agencies.
Gauld is a strong believer in the health system’s new structure, to do away with multiple, parallel systems within DHBs.
“Te Whatu Ora is an attempt in a small country, albeit a distributed country with a lot of different local areas, to get some national consistency, and some economies of scale so things like payroll can be done on a national basis.”
The million dollar questions – or $25 million in this case – are, Gauld says, why has this work been delayed, and how much more needs to be spent? The answers will have to wait.
“I found it very frustrating.” – Andrew Little
The politics of this are interesting.
The National Party oversaw some of the Holidays Act mess, so will it take some responsibility? And the Labour Party has been in charge – albeit in coalition in its first term – for five years so it can’t just blame the previous administration.
“Labour needs to take responsibility for every day of the past five years, during which New Zealand’s health system has completely fallen apart,” National’s health spokesperson Dr Shane Reti says, in an emailed statement.
“Labour’s priority has been to spend hundreds of millions of dollars on ideological health reforms during a pandemic, instead of supporting the front line, building ICU beds, increasing the health workforce and remediating the Holidays Act.
“Unlike Labour, National would not have spent millions on expensive bureaucratic health reforms, but focused on supporting our health workforce and other obligations, including the Holidays Act.”
Health Minister Andrew Little, meanwhile, summarises the situation thus: “This has been a Herculean and complicated task, and progress has been made.
“I am advised that there are some regions that are close to finalising their calculations and could be ready to go. I have said to Te Whatu Ora/Health NZ that I would prefer it if the remediation payments were made to everybody in close proximity to each other so that we don’t have some getting it one month and others getting it months later.”
Little says he was given a deadline of February of this year for the work to be finished. “I found it very frustrating,” he says.
“However, I’m satisfied that a process involving the unions has been set up and has been operating.”
One significant difference has been an “interpretation issue”, which he does not name.
“The complexity of the exercise is that the outstanding annual leave entitlements have to be calculated individually, because of the work patterns and work hours that each person has done. It has to be done for former employees as well.
“In order to get a dedicated focus on this, it was necessary to bring in external consultants who knew the complexities of the Holidays Act and interpreting different employment agreement provisions to apply. That has been expensive, but I’d rather we invest in getting it right.”
Statements from Little and Reti overlooked particular questions.
We asked: “National oversaw some of this mess, what responsibility does it take for this situation?”
None, it seems.
We asked Little for the latest estimated liability for Holidays Act work, and whether the Government has budgeted for Holidays Act payments to be made next year.
Given there are 270,000 existing or former employees involved, even a $5 payment to half of them would be an eye-watering sum.
A fortnight ago, Little told Reti in a response to a written Parliamentary question: “The cost for the expected remediation payments is currently recognised as a liability in the Crown’s financial statements, and the equity funding required to provide cash to settle these liabilities will be appropriated and released once remediation(s) are ready to be settled and payments made.”
The salt in the wounds for long-suffering health workers is the consultants will have been paid long before them.
