The cases being reported generally relate to the underpayment of wages and holiday pay entitlements for more vulnerable employees (e.g. those remunerated on the minimum wage, young and migrant employees). However, Labour Inspectors can (and do) carry out industry and geographically specific audits. Now is therefore an opportune time to ensure that your employees’ pay is compliant.
The greatest non-compliance risk for employers is generally where employees have fluctuations in the hours they work, or receive additional pay on top of their normal wages, such as for shift work or commission payments. It is easy to miss out additional hours or a special payment and for this reason alone, it is critical to maintain accurate time and wage records. (Note also that maintaining time and wage records is a legal requirement for employers anyway).
Where there is an error in an employee’s ordinary pay, leave payments (such as annual leave and sick leave) will also be affected. Calculating leave is not straightforward, and although the Holidays Act was introduced in 2003 with the objective of simplifying the law, many people (including many employment lawyers), find the current law complex and confusing. Ensuring that your payroll system is correctly set up is therefore critical.
If an employee complains that they have been incorrectly paid, it is worthwhile investigating the matter sooner rather than later. We also suggest that you seek specialist advice if you are uncertain about your response. Unremedied errors can cumulate into significant sums of money over time.
If you are faced with a visit from a Labour Inspectorate, as a result of a complaint or one of MBIE’s targeted audits, it is important to know that the powers vested in Labour Inspectorates are wide-ranging. Their job is to ensure employer compliance with minimum employment standards and they can enter the workplace and interview employees, and request information such as pay records. Where a breach is identified, a Labour Inspectorate has tools to enforce remedies such as payment of arrears of wages owing. For more serious breaches (where rights or entitlements have been breached repeatedly or blatantly), a Labour Inspectorate can issue penalties, publicise the case and even take steps to ban employers from the labour market. Recently MBIE also released the names of the companies that its Labour Inspectorate has investigated for breaches.
Employee pay can be complicated but it is critical to get it right. The MBIE website has a host of resources to assist employers. If you are still in any doubt whether you or your employees’ pay is correct, we suggest that you seek specialist advice.