Understanding Underpayment in New Zealand Employment Law
Underpayment occurs when an employee receives less than their legally entitled wages, salary, or other payments for work performed. This can include not being paid the minimum wage, incorrect holiday pay, or unpaid hours of work. New Zealand law establishes clear requirements for employer payment obligations.
Minimum Wage Requirements
Employers are legally required to pay their employees at least the current minimum wage rate. There are different rates for adult workers, starting-out workers, and training workers [Source: Minimum Wage Act 1983, s 4]. It is unlawful for an employer to pay an employee less than the applicable minimum wage [Source: Minimum Wage Act 1983, s 6].
Payment of Wages and Deductions
Wages and salaries must be paid in money unless otherwise provided for by an enactment or the employment agreement [Source: Wages Protection Act 1983, s 2]. Generally, payment must be made at regular intervals agreed upon in the employment agreement, or if no agreement, at least fortnightly [Source: Wages Protection Act 1983, s 4]. Wages must be paid directly to the employee or into an account nominated by the employee [Source: Wages Protection Act 1983, s 5].
Any deductions from an employee's wages are generally only permitted if:
- They are authorised by a specific enactment (e.g., tax).
- They are authorised by the employee in writing for a specific purpose [Source: Wages Protection Act 1983, s 8].
Record Keeping Obligations
Employers have an obligation to keep accurate wage and time records for all their employees. These records must detail, among other things, the hours worked each day, the wages paid, and any deductions made. Such records must be retained for at least 6 years [Source: Employment Relations Act 2000, s 130; Wages Protection Act 1983, s 12A].
Employment Agreements
All employees in New Zealand must have a written employment agreement, which can be individual or collective [Source: Employment Relations Act 2000, s 63]. This agreement must include certain mandatory terms, such as a description of the work to be performed, the ordinary hours of work, and the wages or salary payable [Source: Employment Relations Act 2000, s 65]. The terms of this agreement must comply with minimum entitlements set out in legislation.
Steps to Address Underpayment
If an employee believes they are being underpaid, several avenues are available for addressing the issue:
Informal Discussion: The initial step often involves discussing the matter directly with the employer. This allows for clarification and potential resolution of simple errors.
Raising a Personal Grievance: If informal discussions are unsuccessful or inappropriate, an employee may raise a personal grievance. A personal grievance is a complaint an employee can raise with their employer about an action the employer has taken that negatively affects their employment. Underpayment can constitute a personal grievance of disadvantage if it relates to a breach of the employment agreement or an enactment [Source: Employment Relations Act 2000, s 103(1)(e)].
- Time Limit: A personal grievance must generally be raised with the employer within 90 days of the date on which the action giving rise to the grievance occurred or came to the employee's notice, whichever is later [Source: Employment Relations Act 2000, s 114]. The 90-day time limit may be extended in exceptional circumstances [Source: Employment Relations Act 2000, s 115].
Labour Inspectorate: The Labour Inspectorate is a government body responsible for enforcing minimum employment standards in New Zealand [Source: Employment Relations Act 2000, s 140A]. Employees can report underpayment concerns to the Labour Inspectorate, which has powers to investigate and take enforcement action against employers who are not complying with the law [Source: Employment Relations Act 2000, s 140(1)(c)].
Mediation: If a personal grievance is raised and not resolved directly with the employer, the parties can seek assistance from the Ministry of Business, Innovation and Employment (MBIE) mediation service to help resolve the dispute [Source: Employment Relations Act 2000, s 144].
Employment Relations Authority (ERA): If mediation does not resolve the issue, either party can apply to the Employment Relations Authority (ERA), an independent body that helps resolve employment relationship problems [Source: Employment Relations Act 2000, s 156]. The ERA has the power to investigate and make determinations regarding employment relationship problems, including cases of underpayment [Source: Employment Relations Act 2000, s 159].
Potential Remedies
If underpayment is proven, the ERA can order various remedies, which may include:
- Reimbursement: An order for the employer to pay to the employee the wages or other money lost as a result of the underpayment [Source: Employment Relations Act 2000, s 123(1)(b)(i)].
- Compensation: An order for the employer to pay compensation for humiliation, loss of dignity, and injury to the employee's feelings [Source: Employment Relations Act 2000, s 123(1)(c)(i)].
When to Seek Independent Legal Advice
Individuals seeking clarity on their specific employment situation, including potential underpayment, should consider contacting Community Law Centres for free advice or engaging a qualified legal professional. The Ministry of Business, Innovation and Employment (MBIE) also provides information and guidance on employment standards.