National Blog of New Zealand

The imposition of an average 10-15% holiday surcharge began with the passing of the Holidays Act 2003. ‘The Act’ entitled workers to time and a half and a day in lieu, meaning payroll costs are increased some 150% where merchants choose to open on a public holiday. A worker previously on minimum wage at $12 now effectively earns $30 for working on a public holiday.

Cafes started the trend, and given hospitality’s high labour component most businesses in the industry soon followed.

Judge Thoburn’s ruling in Commerce Commission v Air New Zealand (2005) concluded that not including operating expenses in the ‘headline’ price, “seems wrong in principle and unfair to the consumer, because it could open the door to self serving and indulgent practices”. I wholeheartedly agree with this assessment, and on point here His Honour notes, “an increase in wages by a general wage order of the Government could be separated out”

His Honour suggested that where “headline” advertised prices do not include internal expense, as was the case with Air NZ’s fuel surcharges then its likely to be considered a false price, having regard to how a business must work out its basic pricing structure. Seperating out the cost of wages is, “in principle [unfair] in the marketplace of fair trading practice”, it cannot be remedied by the drawing attention to additional information.

While the average NZ shopper isn’t going to be misled where a sign informing them of a surchage is clearly displayed, employing a surcharge to cover what is clearly an operating expense seems offensive. The test to consider is whether the charge is an integral essential and non-negotiable part of what is required in the operation of the business. A business makes a choice whether to operate on a public holiday, and meeting payroll on this day, as on any other, is quite clearly an internal cost of the business - should they wish to remain open they should spread their overhead costs as they do for all other fixed costs through the year.

As the Holidays Act 2003 does not call for the collection of an additional charge it cannot be invoked by merchants claiming a, “government surchage tax” regardless of their view. This is simply untrue and in breach of the Fair Trading Act 1986.

The extra business transacted on a public holiday should go some way towards meeting the increased costs if they do choose to trade.

Yes it is possible we will see more doors shut these coming public holidays, perhaps those businesses who choose to eschew the surcharge may do a roaring trade as consumers become wary of where every penny is spent.