Can my employer take money out of my pay? Deductions in New Zealand

The four reasons a deduction can be lawful

Section 4 of the Act sets the starting point: when wages become payable, your employer must pay the entire amount without deduction. Everything else is an exception, and Employment New Zealand lists four:

• Required by law. PAYE tax, student loan repayments and child support come off because another Act says they must. Your KiwiSaver contributions come off too, unless you have opted out or have a savings suspension.
• Agreed in writing. You asked for the deduction, or consented to it, in writing, and it is for a lawful and reasonable purpose (s 5).
• Some overpayments. Section 6 lets your employer recover pay for time you were not entitled to be paid for, in the narrow cases covered below.
• A court direction. A court has directed that a deduction be made.

Board and lodging have their own limit. Where the cost has not been agreed, section 7 of the Minimum Wage Act 1983 stops the deduction from reducing your minimum wage pay by more than 15% for board, or 5% for lodging alone.

Written consent, consultation and changing your mind

Many employment agreements have a general deductions clause. Signing one counts as written consent, but section 5(1A) says your employer must consult you before making a specific deduction under it.

Employment New Zealand says meaningful consultation covers what the deduction is for, when it will be made and how much it will be. Its example is an employer that wants $500 from one pay and, after talking it through, agrees to take $50 over the next 10 pays instead. A deduction made without that conversation can be recovered (s 11).

Consent you gave can be changed or withdrawn. Write to your employer saying so, and under section 5(2) it must stop or vary the deduction within two weeks if practicable, or otherwise as soon as practicable. Consent obtained by threatening your job, or by any other duress, can also be challenged under section 11.

Some deductions are off limits even with consent. Section 5A says a deduction must not be unreasonable, and Employment New Zealand says an employer must not make a deduction to penalise you for breaching your employment agreement, or deduct wages for time lost through poor performance.

Damage, till shortages, uniforms and fees for a job

Employment New Zealand's test for a reasonable deduction is that it relates to a measurable loss, one that can be calculated and proven, and is in proportion to that loss. A deduction that is excessive or out of proportion is likely to be unreasonable. So is one for something you had no control over: its example is a customer who drives off without paying for petrol, where the employer must not take the cost from the attendant's pay.

Applied to the common cases:

• Damage. Even with a deductions clause, the amount should match a real, proven cost, follow consultation with you, and never work as a penalty.
• Till shortages. A shortfall caused by theft from customers or others is outside your control. Taking a whole till's shortfall from whoever was on shift, without showing what you caused, is hard to square with a measurable, proportionate loss.
• Uniforms and equipment. Section 12 says your employer must not tell you how or where to spend your wages. Employment New Zealand says that rules out requiring you to buy your own uniform or branded clothing, or giving you a uniform or equipment from the workplace and then deducting its cost from your pay.
• Fees for a job. Section 12A bans any premium for giving you a job or keeping you in one. Employment New Zealand says it is always illegal, including a deduction from your pay or cash handed back after payday, which it calls wage recycling. Some bonding arrangements that recover training or recruitment costs if you leave early may also count as premiums.

Leaving without the notice your agreement requires has its own rule. Your employer only has to pay you for the days you worked, but Employment New Zealand says it must not deduct or withhold wages or holiday pay unless you agree in writing. A clause allowing that is enforceable only if you had time to consider the agreement and seek independent advice, you signed it, and the deduction is based on the employer's actual loss from the notice you did not work.

Overpayments, leave in advance and your final pay

Section 6 lets an employer recover an overpayment without your consent in four cases only: you were paid for a period when you were absent without authority, on strike, locked out or suspended. Even then, it must not have been reasonably practicable to avoid the overpayment, your employer must give you notice before recovering it, usually by your next pay day, and it must recover the money within two months of that notice.

A one-off mistake is different. Employment New Zealand says that when payroll enters the wrong amount, or a system fault pays too much, the employer must not automatically deduct the overpayment: it needs your written consent. If it cannot get that, or you have already left, it may consider mediation.

Leave taken in advance comes up most at the end of a job. If you took annual holidays before you were entitled to them and then leave within your first year, section 23 of the Holidays Act 2003 sets your final holiday pay at 8% of your gross earnings, less what you were already paid for leave in advance. Where the advance was worth more than that, your employer can take the difference from your final pay only with your written consent. Employment New Zealand tells employers to get that agreement in writing when they approve the advance, so check whether you signed one.

Getting an unlawful deduction back

Start with your employer. Employment New Zealand's advice is to talk to them and find out why the deduction was made. Follow up in writing: the date and amount, what you were told, the consent or consultation the law requires, and a date by which you would like it repaid.

Ask for your pay records too. Section 130 of the Employment Relations Act 2000 lets you request your wages and time record for any time in the last six years, and your employer must provide it immediately.

If that does not settle it, there are three places to go:

• Employment New Zealand, on 0800 20 90 20, for information and its free early resolution service. Its mediation service is free as well.
• The Labour Inspectorate, which enforces the rules on wage deductions along with the minimum wage, holiday pay and records. Anyone can report a suspected breach through its online form.
• The Employment Relations Authority. Under section 11 of the Wages Protection Act, you or a Labour Inspector can recover a deduction made without written consent, under consent obtained by duress, without consultation under a general clause, or that was unreasonable, as long as you act within six years. Section 13 also makes the employer liable to a penalty.

A deduction that takes your pay below the minimum wage for the hours you worked is a minimum wage problem too. Our article on whether you are being underpaid explains how pay below the law differs from pay below the market, and our guide to employment rights in New Zealand sets out the rest of the floor every employee has.

Spotting a deduction starts with knowing what should land. Your Career keeps every change to your pay with its date, the whole package and what you take home now, so a payslip that comes in short stands out. It does not read payslips or judge whether a deduction is lawful; it gives you the figure to compare against.

Know what your pay should be