What Is Wage Theft?

You’ve probably heard the term ‘wage theft’ coupled with discussions about tougher sanctions and criminalisation for employers who underpay their employees.

Put simply, wage theft is the underpayment of employees. This often occurs through employers not paying their staff correct wages, not adhering to their staff’s Employment Agreement, and not paying correct entitlements (such as KiwiSaver).

In New Zealand, we have complex laws around payment, and compliance costs and labour costs are high. So it can be easy for employers to make mistakes.

However, wage theft disproportionately affects society’s most vulnerable. Casual workers and foreign workers without support systems and little understanding of their rights in New Zealand are extremely susceptible.

Wage theft is also really widespread, with estimates suggesting a significant number of New Zealand workers are being underpaid.

Where Does Wage Theft Occur?

New Zealand has had instances of wage theft, with cases emerging across various industries. Exploitation of foreign workers is a concern, with some not receiving payment for some or all of the work they did.

Wage theft has been reported in the news, with instances of wages not being paid to workers in popular franchises and well-known establishments across New Zealand.

Let’s look at some examples of how wage theft can occur through underpaying entitlements.

One example is a case involving a New Zealand university, where wage theft occurred over several years and affected numerous staff. The university incorrectly applied rates to staff, while misclassifying certain classes to avoid paying the full rate to staff.

Noticed changes in popular TV shows or restaurants? There have been famous examples of wage theft in New Zealand, where staff were underpaid through incorrect salary arrangements and misapplication of employment agreements. As a result, many staff weren’t paid overtime or penalty rates. The reputational damage to the businesses involved was significant.

What Are the Consequences Of Wage Theft?

The human toll is significant, with the process for victims of wage theft to claim back pay being costly, stressful, and lengthy. This means that many employees who are aware they have been underpaid choose not to go through the process to get their wages back.

For a business, there may be heavy financial penalties. Wage theft can also damage or ruin a business’ reputation and brand.

I’m a Small Business Owner: What If I Accidentally Underpay My Staff?

We know that large corporations are not immune, but small businesses who do not have dedicated payroll officers are at particular risk of underpaying workers.

This means that even if you have the best of intentions, if you have not correctly navigated the Employment Agreement that applies to your employee, you could well be underpaying them.

Understanding Employment Agreements can be complex, and there are different structures available to you as an employer to pay your employees. You’ll also need to be aware of any updates to Employment Agreements.

If you find it overwhelming, you can get professional help to set up your business to ensure you are paying your staff correctly.

It’s imperative to get this right, so don’t be afraid to get legal advice to set this up.

What Happens If I Have Mistakenly Underpaid My Employees?

If you realise you have been underpaying your employees, you need to address this as soon as possible. You will need to figure out how much you have underpaid your employees, and for how long.

You will need to back pay your staff as soon as possible, and let them know of the error. The Employment New Zealand website has a guide you can consult.

What Are The New Laws To Fight Wage Theft?

New Zealand has taken steps to address wage theft. It is an offence to deliberately underpay your employees, with penalties including fines and, in serious cases, imprisonment.

There is also a government body, Employment New Zealand, which aims to help employees reclaim their pay. Employment New Zealand also has the power to fine businesses.

What Next?

Here at Sprintlaw, our employment lawyers are experienced in helping business owners both set up employment contracts, and analyse Employment Agreements. We can also help you with a consultation if you just want to discuss your concerns and already have contracts in place.

Feel free to contact us at [email protected] or on 0800 002 184 for a free consultation.

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