Complex Record-keeping? Leave DIY alone.

By Paul Brown (originally published December 2019)

Imagine more than $80,000 in fines for not keeping proper wage records! This is certainly one the largest fines I have heard of, and all so easily avoidable.

The Ministry for Business, Innovation and Employment (MBIE) recently prosecuted New Zealand Mountain Hunting Ltd, and the company's director, Gary Herbert. A former employee complained staff were required to work for an average of 12 hours a day, for a flat rate of $150 per day (which works out a lot less than the minimum wage).

MBIE requested the usual employee records, including employment agreements, wage and time, and holiday and leave records, but the employer could not provide much of this.

Then it got even worse - the employment agreements lacked basic details, such as the hours of work.

The failure to keep proper records meant that the labour inspectorate could not calculate if money was owing to the employees, which meant that while it was highly likely the employees had been underpaid, they did not get any compensation for this.

The Employment Relations Authority (ERA) handed $55,000 in fines to New Zealand Mountain Hunting Ltd, and a further $27,500 to the company's director.

As MBIE said: "It's unbelievable that after 25 years business, the employer took no steps to set up compliant systems."

The ERA said: There appeared a desire for simplicity in the application of a flat rate to employees, who worked varying duties and hours with benefits of accommodation and food along with the same lines shared by guests of the lodge." The good ol KISS system - keep simple stupid except that is not the law.

The ERA decided the flat-rate payroll system was the result of "intentional actions" and, as result, New Zealand Mountain Hunting Limited was fined.

It's worth noting that it's arguable this company and the owner got off lightly. The maximum penalty for the employer was $720,000, and the maximum penalty for the director was $360,000. Not that anybody has ever be fined the full amount, out it would be a bad day in the office to be fined just over $1 million for poor record-keeping!

In fairness to Gary Herbert, this is not a case of exploitation. He was well regarded by many of his former employees. He immediately admitted his wrongdoing and was fully cooperative with the labour inspectorate. This meant the investigation could be completed promptly, which is relevant when it comes to penalties. And there were significant reductions in the penalties for a variety of good reasons. But still the end result was just over $80,000.

I'm finding that record-keeping is getting increasingly complex, with staff working variable hours, and especially if some of those hours run into public holidays. Then, if you add in discretionary bonuses and the like, it can be hard to calculate the relevant daily pay when it comes to paying out holiday pay, and so forth.

And of course the government itself has got it wrong on numerous occasions.

So in my view, leave DIY alone. All the big accounting software packages have an add-on for payroll and there are specialist companies that will look after payroll for you.

As in everything in employment law, prevention is infinitely cheaper than cure.

If anyone has any concerns over their record-keeping, please feel free to give me a call.