The Crimes (Theft by Employer) Amendment Act 2025 came into force on 14 March 2025. This amendment allows for employers to be criminally prosecuted if it is established that they intentionally withheld wages, salaries or other monetary entitlements (such as the minimum statutory entitlements) from their employees. As a result, any wages disputes that historically have been resolved through the Employment Relations Authority can now also result in criminal charges and prosecution being carried out against an employer.
If an employer is found to have underpaid or withheld payment, then this is no longer just a compliance or reputational risk but could result in serious criminal consequences. Individuals or sole traders that are found guilty of this offence could face up to one year in prison, a fine of up to $5,000, or both. All other employers could face a fine of up to $30,000.
While this amendment is designed to target employers knowingly withholding payment without lawful justification, it is an important reminder to all employers to be cautious about their payroll systems and procedures.
Pay Deductions
Employers should keep in mind that this amendment may impact any deductions that they make to an employee’s wages. Many employment agreements contain a “general deductions” provision that allows for employers to deduct their staff’s wages in certain circumstances. For example, if they have left the organisation without giving the notice required by their employment agreement. If an employer seeks to make a deduction, then they must ensure they comply with their obligations under the Wages Protection Act 1983 by consulting with the worker. If the deduction is determined to be unlawful under the Wages Protection Act 1983, then it is likely that an employer would be found guilty of intentionally withholding payment without reasonable excuse.
Holidays Act 2003 and the Unintentional Withholding of Pay
The amendment is not intended to penalise employers that unintentionally and in good faith withhold an employee’s entitlements. Where there is a genuine mistake made with payroll process then this will not be captured by the amendment.
However, employers should be careful about underpayment due to a lack of understanding about employees’ entitlements. For example, many employers have inadvertently underpaid staff due to complexities arising from when calculating holiday pay under the Holidays Act 2003. In these circumstances, it is likely that an employer would have a “reasonable excuse”. But the parameters of the protection are unclear, particularly where the employer has not maintained clear and accurate payment records.
Therefore, employers should be vigilant with payroll accuracy and recordkeeping. This means having robust payroll systems, up-to-date employment agreements, and clear communication with staff if a payment issue arises.
Key Takeaways for Employers:
Our key recommendations for employers are:
- Ensure that all deductions are made from wages in accordance with the Wages Protection Act 1983.
- Review your payroll processes to ensure that circumstances where wages are being withheld incorrectly or underpaid are avoided.
- Provide the relevant training to staff on proper payroll processes and systems.
If you are uncertain about any of your obligations, it is always best to obtain legal advice.
