Employer Guide to: Wage Deductions in New Zealand

As an employer in New Zealand, it's crucial to understand the laws surrounding wage deductions to ensure compliance and maintain a fair working environment. Unlawful wage deductions can lead to legal troubles and damage your relationship with employees. This guide will help you navigate the rules and regulations, so you can manage wage deductions correctly and ethically.

What are Wage Deductions?

Wage deductions refer to amounts subtracted from an employee's gross pay. These can be for various reasons, including tax obligations, KiwiSaver contributions, student loan repayments, and occasionally specific costs related to employment. While some deductions are mandatory and lawful, others require specific conditions to be met to ensure legality.

Lawful Wage Deductions

In New Zealand, certain wage deductions are lawful if they meet the criteria set out in the Employment Relations Act 2000 and the Wages Protection Act 1983. These include:

1. Mandatory Deductions: These are deductions required by law, such as PAYE tax, ACC levies, KiwiSaver contributions, and child support payments.

2. Court-Ordered Deductions: Any deductions ordered by a court, such as fines or other legal penalties, must be complied with.

3. Employee-Authorized Deductions: Deductions agreed upon by the employee in writing. This could include union fees, insurance premiums, or loan repayments. It’s essential that employees provide explicit and informed consent for these deductions.
   

And if there are other deductions you need to make, be sure to follow a good process

To prevent unlawful deductions, we recommend that you

1. Obtain Written Consent: Always get explicit, written consent from employees for any deductions that are not mandatory or court-ordered. Ensure that employees understand what they are consenting to.

2. Communicate Clearly with Employees: Clearly explain any deductions on pay slips and be open to discussing any queries or concerns employees might have regarding their wages.

3. Review Deductions Regularly: Regularly review your payroll practices to ensure all deductions are lawful and correctly documented.
   

4. Rectify Any Mistakes: If an unlawful deduction has occurred, correct it immediately and compensate the employee accordingly.

5. Seek Legal Advice if Needed: If the situation is complex, seek advice from a legal professional specializing in employment law to ensure you comply with legal requirements.
   

Conclusion

Understanding and adhering to the laws surrounding wage deductions is vital for maintaining a fair and lawful working environment. By ensuring that all deductions are lawful and properly authorized, you can avoid legal issues and build a positive relationship with your employees.