The definition of an employee in the Employment Relations Act 2000 requires that they do work for hire or reward under a contract of service.
An employer is required to reward or pay an employee for the work that they perform.
The employment agreement will usually set out the employees’ pay. Common terms in the agreement are “wages” or “salary”, which are essentially different descriptions of the same thing, namely the employee’s remuneration for work performed.
The Wage protection Act 1983 defines the term “wages” as salary or wages; and includes time and piece wages, overtime, bonus, or other special payments agreed to be paid to a worker for the performance of service or work and includes any part of any wages.
Wages
Wages generally refer to pay calculated on an hourly, daily or weekly basis.
As of 1 April 2025, the minimum wage rate for employees 16 years or older is:
- Adult wage: $23.50 per hour.
- Starting-Ou wage: $18.80 per hour.
- Training wage: $18.80 per hour.
Salary
Salaries, which form part of the definition of wages, are generally calculated on an annual basis and are typically used where the employee works set hours and days each week. The employee on a salary would usually be paid a set amount or pre-determined amount for each pay cycle.
The conditions of an annual salary and the associated entitlements must be outlined between employer and employee in an employment agreement. Negotiating a salary is common practice in most industries and is often crucial to meeting the needs of the individual and the business.
When paying salaried employees, the employer must ensure that their hourly rate is at least equal to the minimum wage. Often salaried employees are paid considerably higher than the minimum wage to accommodate for any overtime the employees may work.
Negotiating an annual salary
Annual salary negotiations give the employer and employee a chance to discuss the terms of an employment agreement. The purpose of negotiating a salary is to reach a mutual agreement that not only falls in line with the current market – but satisfies the needs of the individual and the financial limitations of the employer.
Employers should be prepared to make an offering that guarantees long-term success for the business and the employee.
A key benefit of salary negotiation is that it allows open and transparent communication between the employee and the employer. The employee displays their trust and willingness to commit to the job and are provided an opportunity to voice concerns and discuss their future.
Strategies for employers in salary negotiations
- Be honest- Employers should be honest when setting employment packages and during salary negotiations. Misleading employees with promises and backing out of them can affect their morale and trust in the employer.
- Be confident- An employer or hiring manager, should give confident but clear responses on the practical nuances of salary raises and its implications.
- Have data on hand- Coming prepared to the meeting with data and notes can send a positive sign to an employee and boost their confidence in the Business. This data can relate to their past performance, contribution to the company growth, and the future of their role within the company. This data can support employers with any answers they may need to give, and it will also avoid any miscommunication or relying on memory for key details.
- Understand salary trends- Understanding current salary trends can help employers back their decisions with rationale and accurate information. Knowing the current salary trends for particular roles or industries allows employers to set a realistic bar on how high or low the salary can go.
By appealing to the specific needs of people, rather than focusing on the numbers, employers can make an enticing offer that is mutually beneficial to both parties.
Gross pay vs net pay
The law requires employers to provide their employees with pay slips, including the amounts earned for gross and net pay.
| Gross Pay | Net Pay |
|---|---|
| Gross pay refers to the total amount of money an employee earns from performing work. | Net Pay is also referred to as “take-home pay” and is the actual amount of money an employee is paid once any relevant deductions (such as PAYE) have been made (ie taken off their gross pay) |
| Gross pay does not include any deductions that may be made. |
Crimes (Theft by Employer)
The Crimes (Theft by Employer) Amendment Act 2025 (the Act) came into force on 14 March 2025.
The Act provides that an employer’s intentional failure to pay an employee any money owed in relation to their employment, will amount to theft. For this to amount to a crime, the employer’s failure to pay must be without a reasonable excuse.
What amounts to a “reasonable excuse” will be subject to the facts of each case and the interpretation by the courts. Generally, factors such as a glitch or circumstances outside of the employer’s control may be considered a reasonable excuse, in which case no crime was committed.
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.
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.
Understanding salary and wages with Peninsula
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