Are you paying your employees correctly?

Tuesday 7 August 2018

Authors: Liz Coats and Bronwen Norrie

​​​​​Issues relating to non-compliance with the Holidays Act 2003 continue to receive attention,1 but a number of recent cases suggest there are also widespread issues around compliance with minimum employment standards.

Cases involving the Minimum Wage Act 1983 and Wages Protection Act 1983 have emerged in both the public and private sectors, at a time when these minimum standards are being closely enforced and the number of Labour Inspectors is set to rise.

In this environment, we recommend employers consider reviewing their compliance – a proactive approach that could prove beneficial should a requirement for remediation be uncovered.

Compliance issues widespread​

​A number of recent cases have featured issues of compliance with minimum standards. For example:​

  • In Smiths City,2 the Employment Court held that Smiths City Group had breached the Minimum Wage Act by requiring sales staff to attend meetings before its stores opened, but without paying those employees for their time. This case has potentially significant implications for any employer which requires employees to attend their workplace for meetings or tasks, but does not pay employees for their time for these attendances.

  • In South Canterbury District Health Board v Sanderson,3 the Employment Court held that anaesthetic technicians (ATs) were at "work" while they were on call, for the purposes of the Minimum Wage Act. This meant that the employees should have been paid at least the minimum hourly wage for each hour that they were rostered to be "on call", regardless of whether they were in fact called in to work. In reaching this view, the Court noted several factors which supported the view that the ATs were at "work" during any on call period, including that the ATs were required to be constantly ready to respond to a call out within 10 minutes (and in some cases had to base themselves at hospital-provided accommodation to be able to fulfil this requirement), and the ability to call in such staff was of significant benefit to the DHB.

  • In the Tech 5 Recruitment case,4 the Employment Court held that it was a breach of the Wages Protection Act for Tech 5 to attempt to recover trade testing costs from its employees by way of deduction. These costs primarily benefited the company and were a cost of operating a business, which should not have been passed onto the employees. This meant that the weekly deductions taken by the company to recoup the cost of the trade testing were an unlawful premium under the Wages Protection Act.

Role of the Labour Inspectorate

The Labour Inspectorate is tasked with regulating compliance with New Zealand's minimum employment standards, including the legislation referred to above. It is involved in ensuring compliance by investigating breaches and taking enforcement action. In addition to investigating complaints that it  receives from employees and unions, the Labour Inspectorate undertakes pro-active audits of employers that operate in target industries and sectors where non-compliance issues appear to more commonly arise (such as retail, hospitality, and agriculture).

The Labour Government has committed to increasing the number of Labour Inspectors over the next three years, from 60 to 110 (at a cost of around $9 million). This means that the activity of this regulator will only continue to increase.

What can you do?​

We recommend that employers undertake their own reviews or audits to check compliance before employees make complaints or the Labour Inspector gets involved. This will help to limit the scope of any enforcement action that may be required to remediate historic non-compliance.​​

As part of any review, employers should scrutinise:

  • employment agreements, to make sure that these comply with current law;

  • wage and time records, to ensure that these include all of the information required under the Employment Relations Act; and

  • holiday and leave records, to ensure that these include all of the information required under the Holidays Act.

In addition, one of the common themes to arise from Labour Inspector audits of Holidays Act compliance is that employers do not have a good understanding of their own payroll systems. It is therefore worthwhile considering the way that your payroll system operates to make sure that this is "fit for purpose". 

Employers should not just apply a "one size fits all" approach and must ensure that their payroll system:

  • has all the appropriate business information to accurately calculate employees' entitlements and pay;

  • is able to adapt and respond to any changes in employees' work patterns; and

  • is consistent with the current Holidays Act requirements (in terms of the way that employees holiday and leave entitlements and payments are determined).

In relation to the minimum wage, specialist advice may be required to ensure that all employees receive at least the minimum wage for each period of work (taking into account all of the different elements of their remuneration and the various aspects of their work). In light of the Smiths City and Southern DHB cases, you may need to consider whether there are periods of time when employees are not receiving any pay, but may in fact be undertaking "work-related activities".

How we can assist

We have assisted many employers with reviewing aspects of their compliance with New Zealand employment standards, and provided advice in relation to Labour Inspector audits. We regularly work with other specialists (such as accounting firms or payroll specialists) to ensure that the full range of issues are considered and addressed as part of these compliance projects.

We also provide training and seminars on a wide range of common employment and workplace health and safety issues. Click here for more details​.

For further information on how we can support your business, please contact your usual Bell Gully advisor.

1 See our previous newsletters regarding the Holidays Act: 29 May 2018, 8 March 2018, 27 June 2017.

2 [2018] NZEmpC 43.

3 [2017] NZEmpC 127. In April 2018, the Court of Appeal declined the Southern DHB's application seeking leave to appeal the Employment Court's decision.

4 [2016] NZEmpC 167.


UPDATE: Domestic Violence – Victims' Protection Act 2018

Further to our 19 June newsletter, we can now report that the Domestic Violence – Victims' Protection Act 2018 received the royal asset on 30 July 2018. It amends the Domestic Violence Act 1995, Employment Relations Act 2000, Health and Safety at Work Act 2015, Holidays Act 2003, and Human Rights Act 1993 with a view to enhancing legal protections for victims of domestic violence. The Act comes into force on 1 April 2019.

UPDATE: WorkSafe issues position statement on bullying​

On 2 August 2018, WorkSafe issued a new position statement in relation to bullying and harassment. Under this position statement, WorkSafe has advised that it will "typically only investigate bullying and harassment claims where there is a diagnosis of serious mental harm".​​​​​​



This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Tim Clarke

    Partner Auckland
  • Rachael Brown

    Partner Wellington
  • Liz Coats

    Partner Auckland
Related areas of expertise
  • Employment and workplace safety