Understanding NZ’s New Wage Theft Bill Has Serious Implications For SMEs - Here’s How You Can Boost Compliance

The long-debated Wage Theft Bill in NZ will introduce significant changes to employment law, aiming to hold businesses accountable for underpayments and related misconduct. While its purpose is to protect workers, the legislation has raised concerns around complexity and compliance amongst small and medium-sized enterprises (SMEs). Global employment powerhouse Employment Hero comments on the implications and what businesses can do to boost compliance.

Since April 2023, Parliament has been debating the merits of the Wage Theft Bill (Crimes (Theft by Employer) Amendment Bill) which clarifies that not paying an employee their wages is considered theft. Under the Bill, employers may face criminal penalties for intentional wage theft. After several months of discussion, the Bill progressed to the final stages of the parliamentary review recently and is now at its third and final reading before being enacted into law.

“For SME owners, compliance with the Wage Theft Bill adds another complex layer to an already challenging environment. Increased wages, inflation and operational demands require careful financial management - and now, underpayments could lead to severe penalties, including potential jail time for company directors. This has intensified the need for businesses to ensure their HR and payroll systems are both accurate and compliant,” comments Global employment powerhouse Employment Hero’s Neil Webster, country manager for NZ.

What is the definition of wage theft?

Wage theft occurs when employers intentionally fail to pay employees their full legal entitlements. This can include unpaid wages, unpaid overtime, failure to provide holiday pay and underpayment of minimum wage requirements.

Intentional versus unintentional breaches

An important factor to note is that the Bill relates to intentional underpayments, not unintentional mistakes or administrative errors. That means, for example, if an employer accidentally underpays an employee (and can prove that it was a mistake) it will not be subject to the Crimes Act.

However, the employer may still be subject to fines and other consequences through the Employment Relations Authority and the Employment Court. Each case will be different, and for that reason it’s important you seek professional advice where necessary.

Higher penalties, including prison time for wage theft

The Wage Theft Bill introduces strict penalties for businesses found guilty of intentional wage theft. The maximum (criminal) penalties for wage theft are outlined below:

If the employer is an individual, the maximum penalty would be 1 year’s imprisonment, a fine of $5,000, or both.

In any other case, the maximum penalty would be a fine of $30,000.

Real world cases of wage underpayment

“[the respondents] incomplete and inconsistent approach to record-keeping undermined their ability to effectively enforce employment standards and placed employees at a disadvantage.”

That was the view of one Employment Relations Authority labour inspectorate last month, who enforced a $30,000 fine on a South Waikato dairy farmer for underpaying their employees, among other breaches of employment law.

Breaches like this have been dealt with by the Employment Relations Authority and employment courts for a long time. But under the Wage Theft Bill may now result in additional criminal sanctions.

“This is just one example of how wage underpayments can occur, and the massive impact they can have. Wage underpayment penalties don’t discriminate – whether you’re in agriculture, hospitality, retail or another industry, it is easy to end up in hot water,” comments Neil.

How can your business boost compliance?

• Review your payroll setup - Check wages, overtime, and entitlements regularly. Ensure employees receive the correct minimum wage, holiday pay, and sick leave. The minimum wage increases on 1 April 2025 - be ready.
• Keep accurate records - Record hours, pay rates, tax deductions, and leave entitlements. Store records for at least six years to ensure compliance.
• Train payroll and management staff - Mistakes often happen due to a lack of knowledge. Training on wage laws can help prevent errors and ensure compliance.
• Conduct internal audits - Regularly review payroll processes to catch and correct errors before they become costly issues.
• Use automated payroll systems - Manual payroll increases errors. Payroll software can calculate wages, tax deductions, and entitlements more accurately.
• Seek professional advice - Employment laws change frequently. Get expert guidance to ensure your payroll practices remain compliant.

Easing the burden by leveraging tech

Neil goes on to highlight that “Accountability is critical in employment practices, but we must also acknowledge the strain this legislation places on small business owners. The complexities of managing compliance shouldn’t overshadow their ability to grow and support their teams. By leveraging advances in technology, businesses can streamline operations and avoid inadvertent errors.”

Employment Hero is committed to supporting SMEs through these changes, enabling them to focus less on administrative challenges and more on building their businesses. Their HR software is utilised to manage 10,000 NZ employees at some of the country’s largest SMEs. Its integrated Employment Operating System (eOS) simplifies HR and payroll processes, reducing administrative burdens by up to 80%. Crucially, its eOS includes tools that assist in navigating compliance requirements and helps business owners mitigate risks associated with the new legislation.” “We believe features like automatic award interpretation, real-time updates to pay rates and robust reporting capabilities can assist SMEs in meeting their obligations under the Wage Theft Bill. These come standard with our eOS,” believes Neil.

As SMEs adapt to this new reality, having systems in place to stay compliant is no longer optional - it’s essential.

About Employment Hero

Employment Hero is revolutionising the world of work with the introduction of the world's first Employment Operating System (eOS), a solution designed to address the $20 billion problem of inefficient employment processes globally.

eOS is the next generation of employment technology, a revolutionary system that simplifies and automates complex employment processes, allowing businesses to streamline workflows, reduce administrative burden, and focus on growth

Employment Hero services over 300,000 businesses globally and its core platform reduces admin time by up to 80%. By launching employers toward their goals, powering more productive teams and taking employment to rewarding new heights, Employment Hero is revolutionising the employment marketplace.

For more information visit employmenthero.com

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