Whatu Ora CEO, Margie Apa

The Ministry of Health has now spent $50 million on consultants and held three years of meetings while it watched its liability for an unpaid holiday pay increase for health workers by $150 million a year.

The Ministry has not paid the correct holiday pay to 260,000 current and former health workers since 2015.

It is estimated the pay error could now cost the Ministry $1.8 billion.

Even now, after all the meetings and all the consultants, Te Whatu Ora does not have a pay IT system that can calculate holiday pay.

Committee chair, Dr David Clark, said there was “a degree of impatience” from all of the Committee for justice to be served for the people who have not been paid.

This whole saga now stretches across two governments after it emerged in 2015 when the Combined Trade Unions (CTU) and the Ministry of Business, Innovation and Employment (MBIE) notified the Ministry of Health that they were in breach of the Holidays Act with their holiday pays to the employees of the country’s 26 District Health Boards (DHBs).

“And from that point, a working group of both DHB and MBIE union organisations was established and had been working since then towards remediation,” the new CEO of Te Whatu Ora, the successor to the DHBs, Margie Apa, told the Committee.

But seven years later, Whatu Ora does not know what is owed to each affected individual, so the money has not been paid out, and the health sector IT systems are still not compliant with the Holidays Act.

Even the quoted $1.8 billion cost of the “remediation” is not an accurate count but simply an estimate based on a sample of some of the affected employees’ entitlements.

Apa suggested that the money owed was relatively small when compared to what would be Whatu Ora’s $9.9 billion payroll this financial year.

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The Working Group had to untangle the complex work patterns of the varying type of employees within the DHBs.

“The group did take three years to work through interpretation and the application of the Act in that context, and these interpretations set a common set of assumptions for us to progress remediation,” she said.

At the end of the three years, the three parties agreed on a Memorandum of Understanding (MoU).

National MP Andrew Bayly clearly found the length of time astonishing.

“Why did it take three years for that MoU to be signed?” he asked.

“Even in government terms, that is an extraordinarily long time to sign an MoU.

“What was all that about; did we have a talkfest?”

Apa replied while a seven day a week, eight-hour-a-day business might be simple, the complexity of the health system meant it was not.

They needed to agree on things like what was a week, what was an average week, and how was leave without pay calculated, and adding to the complexity was the heavily part-time nature of the workforce.

“All of those factors needed agreements with unions,” she said.

“And don’t forget we had potentially 20 different interpretations of some of those issues across the district health board.”

Bayly asked whether Apa was trying to say that it took three years of negotiations to work out what would be the basis of a settlement.

 “There were numerous meetings over three years,’ said Apa.

Bayly also wanted to know why it hadn’t been possible to make an interim payment to the people affected.

“So these liabilities just escalated over all these years. Why?” he said.

“Why has there been no attempt to pay out some of this money because a lot of it will not be contentious 

“Why wasn’t paid to people as an interim step to reduce the liability?”

“To be able to make interim payments, we need to be quite confident that we have a sense of the size of the liability for all of our workers,” she said.

“And given the complexity of professionals, the agreements, I think the process of working it through would be quite challenging with a range of payments for individuals that range from a few hundred to a few thousand.”

Bayly: “I couldn’t understand that even in counties why there was no approach at least try and deal with some of that liability.”

But it was then revealed that Te Whatu Ora did not know exactly how much the liability was.

“The financial estimate of liability is based on sampling,” said Rosalie Percival,Te Whatu Ora’s Chief Financial Officer.

“So it’s not recalculating the amount for 82,000 people.

“Calculating the financial liability is based on a sample of staff, and it wouldn’t be fair or reasonable to start to pay some staff because they were sampled and others because they weren’t.”

National MP Paul Goldsmith pointed out that the delays in the payments meant that another $150 million was being added to the ultimate bill each year.

MPs had a private briefing paper from Whatu Ora as well as the public session yesterday, and Goldsmith obviously drew from that for a question about consultants.

“You’ve also managed to spend $50 million on consultants to try and work out what the scale of the problem is as it’s going on year after year,” he said.

“In the context of a $1.8 billion liability and 20 payroll teams that already run a complicated payroll system, we didn’t have the capacity needed,” replied Apa.

Goldsmith was a Minister in the Key Government in 2015; Jonathan Coleman was Minister of Health, but Goldsmith yesterday was keen to distance his former colleague from any responsibility for what happened.

“My understanding is Ministers were told there wasn’t a problem back in 2015, and then clearly there was, and presumably there have been many opportunities to suggest amendments to the Holidays Act to at least involved staunch the losses every year. But you didn’t engage in that?”

Apa reminded Goldsmith that Te Whatu Ora replaced the DHBs and was a new entity, and she was not involved with the Ministry of Health when it first dealt with the problem.

“We’ve been quite focused on trying to interpret the current climate for the current liability,” she said.

ACT MP, Damien Smith, wanted to know whether Whatu Ora was confident the payroll systems were now fixed so there would be no future liability.

“Most of our payroll systems are not compliant with the Act,” said Apa.

Smith: “So you don’t have an assurance that your current payroll systems are fixed to prevent any future holiday pay liability?”

“As of today, they’re not configured,” said Elizabeth Jeffs, (previously incorrectly named as Jeeves) who is the Te Whatu Ora HR executive charged with sorting the holiday pay mess out.

It was left to former Labour Minister Phil Twyford to sum the situation up most bluntly.

“So $1.8 billion of people’s money you’re holding,” he said.

“That’s taken eight years to get to this point.

“Do you agree that from the point of view of presumably one of your employees or a taxpayer, that it’s unconscionable?

“How come the public health system has stuffed this up so badly for so long? 

Te Whatu Ora is hoping to pay the money starting in July. (This has been changed from: “before the end of the year”)