Payroll, leave and employee record compliance – Employers need to get the house in order

Over the past eighteen months, the Labour Inspector has continued to bring successful claims before the Employment Relations Authority against employers who are not keeping wage, time, holiday and leave records that are compliant with their legal obligations. Employers who are have underpaid employees their minimum entitlements have also been prosecuted, including public sector organisations. It is not excuse that a breach was inadvertent, or a result of a non-compliant payroll system.

False comfort for employers – risk of personal liability and impact on immigration

For many employers, a level of false comfort may have arisen, from considering that these prosecutions began largely in common sectors, e.g. the dairy/farming sector, and then moved into areas where there are a significant number of vulnerable migrant workers, who have been exploited by unscrupulous employers. However, ignoring the need for compliance is extremely unwise, as employers, and secondary parties (i.e. persons who are in a position to exercise significant influence over the management or administration of the entity) can also be held to be personally liable for breaches, and remedies arising (including penalties). 

Where employers have not complied with employment standards, they are also viewed as non-compliant with New Zealand employment law and will face a stand down period from the ability to support a visa application, i.e. this has a significant impact on the ability to obtain a migrant workforce. Those employers will have an uphill battle seeking Accredited Employer status or supporting other visa applications.

We expect the Ministry of Business Innovation and Employment (MBIE) Labour Inspectorate to continue to expand the sectors it is auditing. At risk are those within the horticulture, hospitality, retail, builders, and civil construction sectors. Employers in this sector should be getting the house in order.

Payroll compliance

There is a simple reason why keeping compliant records is important: these ensure that an employee is receiving all of their minimum entitlements.

Unfortunately, many employers have been caught out relying on automated payroll systems to maintain pay and leave records for employees, as well as calculating holiday entitlements. The accuracy of those records will only reflect the quality of information entered by an employer.

To ensure that the current practice of the business is compliant, a starting point for employers will be to ensure that:

1. Payment of annual leave, bereavement leave, alternative holidays, public holidays and sick leave is in accordance with the Holidays Act 2003;
2. Employers are recording all information legally required for wage and time records, as well as holiday and leave records; and

Employers have obligations to keep employee records for six years (and includes records for former employees).

What employers should be doing

We encourage employers to ensure that they get good advice around their employee records, check with their payroll provider, and keep a watching eye on maintaining good, compliant records. It’s legally required and the right thing to do by your employees. Being on the receiving end of enforcement action is a significant cost to any business, compared to regular steps taken by an employer to simply ensure compliance.

DTI Lawyers specialist employment law team are experienced in auditing employee records for employers to ensure compliance, and/or providing the necessary advice where these are not meeting an employer’s legal entities.