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Wage underpayment and the Crimes Act.
Payroll compliance is now a governance issue for directors and business owners. We help employers understand the risk and build systems that protect the business.
Written by
Carlile Dowling Lawyers
General information only — not legal advice.
Erick advises employers facing wage-underpayment investigations and the new criminal exposure under the Crimes (Theft by Employer) Amendment.
Why employers should care now
Payroll mistakes were once a civil employment problem. Back-pay the shortfall, perhaps pay a penalty. That was the extent of it.
New Zealand's Crimes Act now includes an offence often described as "theft by employer". This targets situations where an employer knowingly fails to pay money owed, without a reasonable excuse.
The offence does not criminalise every payroll error. It changes the risk profile where underpayments are deliberate, repeated, or ignored after discovery.
Higher risk
Repeated shortfalls. Ignored complaints. No payroll audit. No remediation plan. Directors aware but taking no action.
Lower risk
Genuine mistake. Promptly discovered. Remediated quickly. Systems improved. Documented at each stage.
Four steps for employers
We help businesses work through each of these. The goal is a defensible position, not just a quick fix.
Treat compliance as governance
Ensure periodic payroll audits. Assign clear responsibility for payroll settings. Build a process for handling errors when they surface.
Stop the error and scope it
Once you discover an underpayment, stop it immediately. Then work out who is affected, how far back it goes, and how much is owed.
Remediate consistently
Calculate remediation on a consistent basis. Pay it. Communicate clearly to affected staff. Verbal assurances are not enough.
Document everything
Record what you knew, when you found out, what steps you took, and why. This is the documentation that demonstrates good faith.
Reasonable excuse matters
The prosecution must prove intent. Good records and prompt action are your best protection if the matter is ever reviewed.
Risk areas employers should audit
These are the payroll areas where underpayments most commonly hide, especially in small to medium businesses.
Holiday pay
Gross vs ordinary pay calculations. Otherwise working day logic. Annual leave rates for staff with variable hours.
Minimum wage
Salaried staff working more hours than assumed. Deductions that push effective pay below the floor. Unpaid training time.
KiwiSaver
Wrong rates applied. Contributions not passed through. Employer contribution calculated on the wrong base.
Deductions
Accommodation, tools, uniforms, or overpayment recovery without proper written authority. Or deductions exceeding what is lawful.
Hawke's Bay lens
Hawke's Bay businesses often have features that increase payroll complexity. We see these patterns regularly in the region.
Seasonal peaks
Variable hours and seasonal staff create complexity in leave calculations and minimum wage compliance.
Accommodation arrangements
Staff housing needs careful structuring to avoid deduction problems and minimum wage shortfalls.
Variable hours
Staff with changing rosters need accurate tracking. Holiday pay calculations become more error-prone.
Piece rates
Productivity incentives and piece rates still need to meet minimum wage for every hour worked.
When to get advice
Some situations need prompt legal input. We help employers respond quickly and build a clear plan.
Contact us if any of these apply:
Underpayments appear long-running or affect multiple staff members.
A complaint or Labour Inspectorate enquiry is already in play.
You suspect an intentional element or internal fraud in wage settings.
You need a remediation plan that will stand up to regulatory scrutiny.
Directors are unsure of their personal exposure in a payroll failure.
Key Takeaways
Payroll compliance is a governance obligation for directors and owners.
The Crimes Act offence targets knowing failures to pay, not honest mistakes.
Prompt remediation and clear documentation are your best protection.
Hawke's Bay seasonal businesses face extra complexity in wage compliance.
Related Employer Guide
Underpayment cases start with payroll drift. Step 2 of the Employment Law Guide walks through pay compliance, record-keeping, and the audit trail that defends the response.
Read the Step 2: Pay & HoursRelated Reading
KiwiSaver Changes from 1 April 2026: Employer Payroll Checklist
KiwiSaver default contributions rose to 3.5% from 1 April 2026. A practical employer checklist for confirming payroll settings, handling temporary rate reduction requests, and updating onboarding workflows.
Accommodation Deductions and Minimum Wage: Lessons for Hawke's Bay Employers
Employer-focused lessons from a Hawke's Bay accommodation and minimum wage case, with a practical checklist for deductions and payroll setup.
