Microsoft New Zealand is reviewing its employees' remuneration contracts after a former senior account manager took out a lawsuit against the firm.
The Employment Relations Authority ruled on May 1 that Microsoft must pay Andrew Watson holiday pay accrued from bonuses dating back six years from his resignation.
A company spokesperson said Microsoft was now reviewing whether the same applied to other employees.
While this is believed to be an unprecedented case for the company, bonus holiday pay is a common matter of dispute in multinationals where contracts are written overseas where different employment law applies.
Documents obtained by the Herald show Watson was employed by Microsoft as a senior account manager in April 1999.
A performance-based bonus system was offered if he out-performed the requirements of the position, but was not guaranteed.
In October 2001 his title changed to major accounts manager and his remuneration scheme was changed to include a revenue-based bonus to be paid in March and September.
Watson received these payments each year from 1999 to 2007, but no corresponding holiday pay.
The case evolved because under the Holidays Act 2003, holiday pay applies to gross earnings but not discretionary payments.
Watson argued the revenue-based bonuses were classed as gross earnings - or earnings the employer is required to pay under the employment agreement.
Microsoft said the payments were discretionary under both contracts.
Because both the letters held by Watson - both that of offer and his position change - stated his remuneration included bonuses, the Employment Relations Authority ruled in favour of Watson.
Employment lawyer Greg Cain, a partner at Minter Ellison Rudd Watts Lawyers in Wellington, said the case was common for multinationals.
"While it might be frustrating for employers that items such as a bonus attract holiday pay, they are the biggest part of some people's pay. And it's only really truly discretionary payments that escape the net.
"It is common for multinationals to have generic wording that applies in all countries. And that gets them into difficulty because most countries have different rules," Cain said.
The company's spokesperson said Microsoft was working with its former employee to comply with the decision and agree on a contribution to his legal costs.
