New laws that came into effect on 14 March 2025. means “wage theft” is now a criminal offence.
Simply put, the crime of theft by an employer is when an employer intentionally doesn’t pay any money owed to an employee in relation to their employment, without a reasonable excuse. This would include wages, salary, leave benefits, commission and overtime pay, public holiday pay, allowances, agreed commission or KiwiSaver contributions.
Underpayment of wages is unfortunately common in New Zealand and the most vulnerable workers, such as casual and migrant workers, are the most susceptible to abuse in this respect. Withholding payments to employees has been found in all industries, from small micro business to large corporations and franchises.
It is critical that employers are up to speed with legislation around theft by employers to ensure compliance and avoid severe penalties, which could include a prison sentence.
Wage theft legislation in New Zealand
The government passed the Crimes (Theft by Employer) Amendment Act 2025 (the Act) in March 2025.
The Act inserted section 220AA into the Crimes Act 1961 to provide that an employer’s intentional failure to pay an employee, without reasonable excuse, any money owed in relation to their employment, will amount to theft.
Any money owed to an employee in relation to their employment, would arise from:
- an employment agreement (written or otherwise); or
- an Act (for example, the Holidays Act 2003, the Minimum Wage Act 1983, or the Wages Protection Act 1983).
The Act is intended to apply to employers who owe wages and intentionally do not pay them to the employee. This would include the unlawful withholding of wages, salaries, and other monetary entitlements within an employment relationship. The “intentional” failure to pay money owed to an employee is a key element of establishing that a crime has been committed. Thus, a non-payment due to a payroll malfunction or a genuine misunderstanding would be lacking the necessary “intentional” element to prove beyond reasonable doubt that the non-payment amounted to a crime.
Even if it is established that the nonpayment was intentional, an employer may raise the defence of “reasonable excuse”. What amounts to a “reasonable excuse” will be subject to the facts of each case and the interpretation by the courts. Generally, delayed timesheets, disputes about timesheets and cash flow issues may be considered reasonable excuses.
Penalties for wage theft
The Act also provides the maximum penalties for the offence of theft by an employer. 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.
These penalties to not replace fines for non-compliance with employment legislation (such as the Holidays Act 2003 and the Wages Protection Act 1983), nor do they replace any compensation that may be awarded for an unjustified dismissal or disadvantage. The penalties for wage theft are in addition to these fines and compensation.
Tips for dealing with underpayments
Underpayments are costly mistakes for businesses and employers. If you have miscalculated and underpaid an employee, there are ways to rectify the error.
Once you have identified an underpayment, you need to calculate the correct amount internally, or you can enlist the help of a forensic accountant or employment lawyer. You will then need to backpay your employees as soon as possible and hold an internal audit to avoid further mistakes or non-compliance.
Having robust processes in place can prevent you from making mistakes such as underpayments or overpayments. Payroll systems, underpayment policies, and resilient resources can protect you from risks and penalties.
With the changes in legislation around theft by employers, employers and business owners need to stay on top of their obligations. Knowing the rules and regulations around underpayments and overpayments is not enough. You should also have a strategy to deal with any occurrences.
There are other things to consider as well. What do you know about withholding pay? Is there a system in place you can use when overpayments occur? Do you have an underpayment policy?
Peninsula provides thousands of small businesses with expert advice on HR and Health and Safety issues including wage and entitlements compliance. Call now for free initial advice.