UPDATED: 12.17PM The Government is being ridiculed for failing to spot widespread payroll issues, which could have affected both private and public sectors.

LISTEN ABOVE: Employment lawyer Phillipa Muir speaks to Mike Hosking

The problem was originally discovered at the Ministry of Business, Innovation and Employment, and stems from a 2004 law change to the Holidays Act.

MBIE is now working to fix its payroll after it was revealed that some of its 3000 staff had been paid the wrong amount in holiday entitlements.

The issue has also affected New Zealand Police. Finance Minister Bill English revealed the police have paid out $30 million to their staff after entitlements were miscalculated.

MORE: English reveals Holidays Act glitch

National said it's not their fault, and the problem stemmed from "very complicated" law changes made under Labour to holiday entitlements 12 years ago.

Steven Joyce said there are four different ways of calculating holiday pay.

It's part of the Holidays Act, which has been described by a partner with law group Simpson Grierson, as an overly-complex dinosaur that needs change.

Joyce told Mike Hosking he knows there's a number of payroll systems around the country that don't do the calculations correctly.

"When people go to change that, then naturally enough, everybody get their backs up and says, 'We don't want to change and lose any of our entitlements', which is fair enough.

"The reason Labour went with ordinary time and the average weekly wage comparison in the first place is they couldn't make up their mind who would be worst affected".

But Labour's Economic Development spokesperson David Clark said the Government needs to take responsibility, for not noticing and fixing the problem after being in power eight years.

"It's no good duck-shoving. The minister has to take responsibility for the failure of his department to pay its staff adjacently over an eight-year period."

Clark said workers need to be able to have confidence in their pay packet.

"The Ministry for Business is responsible for this aspect of the law. If they cannot pay their people properly, how can anyone else in wider New Zealand be expected to pay theirs."

New Zealand First leader Winston Peters agreed the Government needs to take responsibility.

"Well it's humbug," Peters said. "They've been in office now for seven years, and anyone who is able to run a university cafeteria could sort this one out."

Peters said it's a debacle, that shows Steven Joyce no longer deserves the nickname, 'Mr Fix It'.

"He couldn't fix Novopay up properly, he can't fix this up, and he can't fix up the expenditure in his own department." 

Business New Zealand CEO Kirk Hope pointed out some state agencies have paid out correctly, but it's not known how many in the private sector may have also interpreted the guidelines wrong.

Hope said pay that varies is more likely to be a challenge for employers because of the way it's worked out, and he urges companies to check-in with local business associations to save money in the future.

A woman identifying herself only as Paula has told Leighton Smith she's been battling with her employer for months over holiday pay.

"Over the last sort of two months I've been in negotiations with payroll and I'm getting nothing back. I believe I am owed $27000 dollars from the last eight years of being in employment".