McDonald's could return $ 29 million to its workers in New Zealand for a mistake

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McDonald's could return $ 29 million to its workers in New Zealand for a mistake

Hong Kong (CNN Business) - McDonald's agreed to pay what could be tens of millions of dollars to its New Zealand employees following a national payroll issue.

The fast food company will pay all its employees and former employees for the past 10 years for miscalculated vacation wages, according to McDonald's spokesman, Simon Kenny.

The agreement was reached after a year of campaign by the local Unite Union, which Kenny says represents approximately 7% of McDonald's employees in New Zealand. Kenny estimates there are about 40,000 employees affected.

The union estimates that the figure is much higher, up to 60,000 employees, and said in a statement on Monday that "it is possible that some people who worked for McDonald's after November 2009 may be owed some money."

The union's national director, Mike Treen, estimates that resolving this dispute could cost McDonald's at least 45 million New Zealand dollars (almost $ 29 million), according to Radio New Zealand, a CNN affiliate, and that is just an "initial figure."

Both Kenny and the union pointed out that this is not an isolated incident, but part of a much larger problem that has affected both public and private sector employees in New Zealand.

Unite Union explained that it presented the problem to McDonald's for the first time in 2015, accusing the company of "stealing" annual employee vacations by not paying holidays properly and not giving them compensation off days.

Since then, the company has been working with McDonald's and the Ministry of Business and Enterprise Innovation (MBIE), the New Zealand government agency that enforces economic policies, to reach an agreement.

"We have spent tens of thousands of hours working on a very complex project, to ensure that the way of doing the calculations is correct," Kenny said in a statement sent to CNN Business. "With the agreement established, we can now start doing individual calculations."

Payroll problems across the country

McDonald's is one of the many companies that have been affected by the payroll problem across the country: more than 150 companies are under audit, according to the MBIE. In 2016, the government estimated that wages could be owed to up to 763,000 employees across the country, and the total cost of the resolution could reach 2,200 million New Zealand dollars (about 1,400 million dollars), Radio New Zealand reported.

And it's not just about private companies. Even government agencies such as the MBIE and the District Health Boards have made similar mistakes when calculating vacation pay. Health boards announced last month that they owe health workers up to 650 million New Zealand dollars (about $ 415.7 million), Radio New Zealand reported.

The payroll crisis is due to a very complex law, the Vacation Law, which was enacted in 2003.

The law is relatively simple for employees who work five days and 40 hours a week. But it is much harder to apply to certain industries with irregular schedules, such as hospitality, retail or health, according to a 2018 report commissioned by the government.

The law is so complex that even employers have trouble interpreting it correctly, according to the report. For example, there are many different ways of calculating the daily payment, the weekly payment, the holiday payment and the payment of alternative holidays, so it is difficult to know when to use what calculations.

The rules have only become more confusing as the work culture has changed over the years, now that more employees work flexible hours or receive commission payments. According to Radio New Zealand, some companies, after discovering their mistakes, will have to review the entire payroll system to comply with the law.

After many companies complained that the law was too complex, outdated and expensive, the government formed a task force to review the law, identify problems and make recommendations. The investigation is still ongoing.

Labor Relations Minister Iain Lees-Galloway said last year that the task force would help simplify the existing law, Radio New Zealand reported.

"There has been a huge change in our labor market in the last 15 years and it is clear that we must look at the Vacation Law with new eyes and ensure that it is suitable for modern work environments and new work situations," he added.

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