Helpful clarification from the Court of Appeal has been released on what amounts to a “discretionary payment” under the Holidays Act 2003, in Metropolitan Glass & Glazing Limited v Labour Inspector  NZCA 560.
Metro Glass had a short-term incentive scheme setting out targets and payments that would be made if the targets were met. Importantly, the invite letter said that any payments under the scheme were “totally at the discretion of Metro Glass”, and there was no guarantee of any payment even if the targets were met. The letter also described Metro Glass’s sole discretion to amend, revoke or discontinue the scheme at any time.
The Court of Appeal said that payments under Metro Glass’s scheme was not guaranteed or conditional. Metro Glass had included an express term in its scheme that even if all of the conditions were met, it retained the discretion not to make any payment. The Court said this meant the payments remained discretionary, and so did not have to be included in gross earnings under the Holidays Act.