114Payment of interest when Corporation makes late payment of weekly compensation

1. The Corporation is liable to pay interest on any payment of weekly compensation to which the claimant is entitled, if the Corporation has not made the payment within 1 month after the Corporation has received all information necessary to enable the Corporation to calculate and make the payment.

2. The Corporation is liable to pay the interest—

3. for the period from the date on which payment should have been made to the date on which it is made (the liability period); and
4. at the interest rate or rates for the liability period.

5. The period described in subsection (2)(a)—

6. does not include the day on which the payment should have been made; and
7. includes the day on which the payment is made.

8. In this section, interest rate means the base rate plus the premium where—

9. the base rate is—
   1. for any day on or after 1 July in a year to the close of 30 June in the year that follows, the average of the 6 observations for the retail 6-month term deposit rate most recently published by the Reserve Bank of New Zealand before 30 April in that year; or
   2. if another base rate has been prescribed for the purposes of this section, that base rate:
10. the premium is—
    1. 0.95%; or
    2. if another premium has been prescribed for the purposes of this section, that premium.

11. The interest rate (as defined in subsection (4)) is a per annum simple interest rate.

    Example 1

    The Corporation is liable to make a payment of $100 on 15 November 2018 but does not do so until 15 March 2019. The liability period, for which the Corporation is liable to pay interest on this amount, is therefore 120 days.

    For the liability period, the 6 most recent observations for the retail 6-month term deposit rate published by the Reserve Bank of New Zealand* before 30 April 2018 are, for the purposes of this example, assumed to be 3.25%, 3.35%, 3.35%, 3.38%, 3.31%, and 3.31%, being the published rates for the months from October 2017 to March 2018. The average of these 6 observations is 3.325%. This is the base rate.

    The base rate and the premium, namely 0.95% in this case, is 4.275%. This is the interest rate that must be used to calculate how much interest the Corporation must pay, in addition to the overdue amount, on 15 March 2019. The total interest payable may be calculated using the equation—

    $I\; =\; P\; (rt)$

    Where:

    • I I

      is the total amount payable

    • P P

      is the amount of the payment that should have been made

    • r r

      is the interest rate

    • t t

      is the liability period expressed in years

      $$$I\; =\; 100\; (0.04275\; x\; 120/365)\; =\; 1.4055$$I\; =\; \$1.41$

      Where:

    *See “B3 Retail interest rates on lending and deposits” at http://www.rbnz.govt.nz

    Example 2

    The Corporation is liable to make a payment of $100 on 15 May 2018 but does not do so until 15 November 2018. The liability period, for which the Corporation is liable to pay interest on this amount, is therefore 184 days.

    The base rate for the 46 days from 15 May 2018 to 30 June 2018 is the average of the 6 most recent observations for the retail 6-month term deposit rate published by the Reserve Bank of New Zealand before 30 April 2017. For the purposes of this example, these are assumed to be 3.15%, 3.21%, 3.21%, 3.28%, 3.25%, and 3.25%, being the published rates for the months from October 2016 to March 2017. The average of these 6 observations is 3.225%.

    The base rate plus the premium, namely 0.95% in this case, is 4.175%. This is the interest rate that must be used for the first 46 days of the liability period.

    The base rate for the remaining 138 days of the liability period, starting on 1 July 2018 and ending on 15 November 2018, is the average of the 6 most recent observations for the retail 6-month term deposit rate published by the Reserve Bank of New Zealand before 30 April 2018. For the purposes of this example, these are assumed to be 3.25%, 3.35%, 3.35%, 3.38%, 3.31%, and 3.31%, being the published rates for the months from October 2017 to March 2018. The average of these 6 observations is 3.325%.

    The base rate plus the premium, namely 0.95% in this case, is 4.275%. This is the interest rate that must be used for the remaining 138 days of the liability period.

    The total interest payable may be calculated using the equation—

    $I\; =\; P(r1t1\; +\; r2t2)$

    Where:

    • I I

      is the total interest payable

    • P P

      is the amount of the interest that should have been paid

    • r 1 r ₁

      is the interest rate for the 46 days of the liability period up to 30 June 2018

    • t1 t₁

      is the portion of the liability period up to 30 June 2018 expressed in years

    • r 2 r ₂

      is the interest rate for the 138 days of the liability period starting on 1 July 2018

    • t2 t₂

      is the portion of the liability period starting on 1 July 2018 expressed in years

    $$$I\; =\; 100(0.04175\; x\; 46/365\; +\; 0.04275\; x\; 138/365)\; =\; 2.1425$$I\; =\; \$2.14$

    Where: