payment of wages & deductions

The Wages Protection Act 1983 sets out the way wages must be paid, and prevents unlawful deductions from wages.

When and how should wages be paid?

Employees should be paid on the day, and at the intervals, agreed with the employer. Employers cannot change the normal pay day without the agreement of the employee.

Employees have the right to be paid in cash unless:

• They are employed by a local authority or the Crown, when payment can be by cheque
• They have given written consent to other forms of payment
• They are absent from the normal place of work at the time wages are normally paid, when they can be paid by postal order, money order, cheque
• Their employment agreement permits some other form of payment.

Employers are not allowed to control the way employees spend their money.

Women and men must receive the same pay rates for doing the same or substantially similar work.

An employer cannot discriminate due to an employee’s colour, race, ethnic or national origins, sex (including pregnancy or childbirth status), martial or family status, age, disability, religious or ethical belief, political opinion, sexual orientation or union activity.

What deductions can be made from wages?

Employers should generally not make deductions from employees' wages.

Deductions can be made when:

• The employee has given their written consent. The employee can withdraw this consent in writing at any time and the employer should then stop the deductions within two months or as soon as practicable. (This applies, for example, to deductions of union fees)
• For overpayments where the employee has been absent from work without the employer's authority, been on strike, locked out or suspended. (The employer must tell the employee before deducting any money and then make that deduction within two weeks of telling them)
• They are provided for in an employment agreement
• A Court directs that a deduction be made
• A bargaining fee arrangement applies to the employee
• They are required by law (for example, income tax, child support payments or other statutory purposes).

If an employee is provided with board and lodging, a deduction of 15% for board, or 5% for lodging, can be made.

Can an employer recover wages overpaid to an employee?

An employer can recover an overpayment of wages by deductions from wages only in strictly limited circumstances, as set out in the Wages Protection Act.

If an employee resigns without giving the required amount of notice, an employer cannot make deductions or withhold their wages or holiday pay unless the employee has given their written consent. A written employment agreement may include a clause giving the employer permission to deduct wages if an employee resigns without giving the required notice. If the employee has signed the agreement, this can be taken as written consent for the employer to make this deduction.

Can payments be made differently under a Collective Agreement?

The Wages Protection Act 1983 allows for collective agreements to set out other deductions and methods of payment.

Can deductions be made for union fees?

The Employment Relations Act 2000 inserts into all union members' employment agreements a requirement to deduct union fees. Unions, employees and employers may vary these arrangements in their agreement.

Can an employee recover money owed by an employer?

If an employer does not pay all the wages, allowances or other money that have been agreed to in an employment agreement, the employee (or the employee’s union or representative) can go to the Employment Relations Authority to ask for what is owed, after following the problem solving procedures. (See Can you fix the problem yourself? http://www.ers.dol.govt.nz/problem/first_steps.html)

The Authority will hear wages claims dating back six years. Employees can also ask the Authority to order the employer to comply in future with agreed conditions of employment, including pay rates.

What happens if a business goes into receivership?

When a business goes into receivership all its debts are ranked in order of priority as set out by law. Wages and holiday pay owed to employees have a high priority, after secured debts such as mortgages.

Employees should take their claim for any outstanding wages or holiday pay to the Receiver – the person appointed to manage the businesses affairs.

Can an employer be held personally responsible for paying wages?

If a Labour Inspector is taking a case to the Authority to recover minimum wages or holiday pay from an employer that is a company, the Authority may authorise the action to be brought personally against a director, officer or agent of that company. However, the Authority can only authorise such an action if:

• The director, officer or agent of the company directed or authorised the default in payment, and
• The Labour Inspector establishes before the Authority that the money is unlikely to be paid in full, either because the company is in receivership or liquidation, or because there are reasonable grounds for believing that the company does not have enough assets to pay the money in full.

Where an action (that the Authority has authorised) is heard, if it is proved that the director, officer or agent did direct or authorise the default in payment, that person can be held personally liable for the amount owing, as can the company itself and any other director, officer or agent who also directed or authorised the default.