The Wages Protection Act is primarily a piece of law that protects the payment of wages that employees are paid. Specifically, it has rules around:

  • deductions;
  • overpayments;
  • additional penalties.

It covers a raft of situational situations, like deductions for board and lodgings. It forms part of the web of employment laws in New Zealand that regulates employment relationships. This article will:

  • provide a brief overview of the Wages Protection Act;
  • explain how deductions from employee pay work; and
  • explain what you need to know about overpayments and recoveries.

Overview of the Wages Protection Act

The Wages Protection Act is a relatively straightforward piece of legislation that mostly deals with deductions from employee wages. The general rule set out by the Wages Protection Act is that deductions from wages are unlawful, unless an employee has specifically agreed to the deduction in question.

However, there are many situations where an employer feels like a deduction of an employee’s wages is important. The Wages Protection Act explains how these situations should be managed. Primarily, it is a law aimed at protecting employees from unfair or random acts by employers to pay less than their contracted salary or wages. 

How Deductions from Employee Pay Works

As stated, generally speaking employers cannot deduct any amount from the wages or salary paid to an employee. However, there are some exceptions. These include where:

  • the deduction is specifically required by law. Examples of this include tax, student loan repayment and child support payments, where the employer is paying something on the employee’s behalf;
  • the employee has agreed to the deduction in writing. This includes a general deductions clause in an employment agreement, but as an employer you must still consult with the employee before making a deduction. The employee can vary or withdraw their written consent to a deduction by giving notice in writing at any time;
  • a court directs that a deduction be made; or
  • the deduction is to recover an overpayment in limited circumstances.

Deductions should be done very carefully, and almost always with the employee’s consent. Even if there is a deductions clause in the employee’s employment agreement that provides for deductions to be made from the employee’s wages, you still need to consult with the employee. This involves telling them the prospective deduction you are seeking to make and obtaining their feedback about it.

Rules Around Overpayments and Recovery

Overpayments are where an employee is mistakenly paid more than the amount of wages or salary that they are contractually entitled to. Overpayments can happen from time to time, either as a consequence of a mistake in payment systems or human error. When this occurs, an employer will seek to recover the amount of money that was overpaid. 

It is possible to recover overpayments through deduction from wages, but only in select situations. If an employer overpays an employee one time only due to miscalculations or errors with payroll (no matter whether the issue is due to software or human error), the employer must first attempt to agree with the employee about how and when the money is to be paid back.

Again, the emphasis is on the employee consenting to have their wages deducted from. You should get this agreement in writing. 

If you cannot get the employee’s written consent, or the employee has left their employment with your business, you can consider recovering the overpayment through the Employment Relations Authority. 

Key Takeaways

The Wages Protection Act protects the integrity of wages and salaries paid to employees in New Zealand. It largely deals with deductions of those wages, and makes clear that unilateral deductions from wages are not lawful. If an employer wants to deduct from wages, including for a mistaken overpayment, they must get the employee’s consent in doing so. While a deductions clause in an employment agreement does represent the employee consenting to some forms of deductions, you must still consult with the employee when looking to enforce a deductions clause.  If you have any other questions about the Wages Protection Act or deductions from wages, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.

FAQs

 
What happens if my employer deducted money from my wages without my consent?

This is illegal in most cases, due to the Wages Protection Act. The employer should pay you the difference once you raise the issue with them. Otherwise, you can contact the Employment Relations Authority who can order an employer to pay that money to you.

What happens if there was a genuine overpayment mistake?

You must agree with the employee in writing that the overpayment can be recovered through deducting the employee’s wages. If the employee does not agree, you should look to recover the amount through the Employment Relations Authority.

Can an employer deduct wages for poor performance or work taking too long?

No, this is not lawful. You cannot deduct wages for poor performance.

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