New Zealand employers can no longer afford to take payroll compliance lightly. A simple mistake—even if unintentional—can now lead to criminal charges, hefty fines, and even jail time.
Under the Crimes (Theft by Employer) Amendment Act 2025, wage theft is officially a criminal offence. That means if you fail to pay employees their correct wages or entitlements—whether by accident or on purpose—you could be reported to the police and prosecuted under the Crimes Act 1961
What This Means for Your Business
- Wage theft is now a crime. Businesses that underpay staff can face criminal charges.
- Employers can be fined up to $30,000 or jailed for up to 12 months.
- Payroll errors are no longer just civil disputes. Employees can report wage theft directly to the police (RNZ).
- Even honest mistakes could lead to prosecution—miscalculating holiday pay, forgetting an overtime payment, or incorrect deductions could put you at risk.
What’s Changed? From Payroll Mistakes to Criminal Charges
Before This Law:
If an employee was underpaid, they had to:
- File a civil claim through the Employment Relations Authority.
- Pay legal fees to recover unpaid wages.
- Wait months (or years) for a resolution.
Now:
Employees can report unpaid wages directly to the police, just like any other theft case. This means issues that were previously handled as civil matters are now criminal offences (Scoop).
The Risks for Business Owners
Payroll compliance is no longer just about keeping employees happy—it’s about protecting your business from legal and financial consequences.
- Legal Penalties – Up to 12 months in jail or $30,000 in fines.
- Reputational Damage – A wage theft charge could destroy trust with employees, customers, and suppliers.
- Higher Employee Turnover – Payroll issues erode loyalty and morale.
- Hiring Challenges – A history of disputes makes it harder to attract top talent.
Mistakes happen more often than you think. According to Xero, 30% of SMEs make payroll errors every quarter—often without realising it.
Why Payroll Audits Matter—And Who Should Do Them
Many small business owners lack the time, systems, or expertise to properly audit their payroll. With the increased legal risks under the new wage theft law, now is the time to prioritise payroll reviews—professionally and thoroughly.
That’s why we strongly recommend engaging your Chartered Accountant to conduct regular audits.
We’re trained to:
- Spot discrepancies and underpayments,
- Identify compliance gaps and risks,
- Review procedures and recommend improvements.
Rather than navigating this complex landscape alone, businesses should lean on the expertise of professionals who understand the intricacies of New Zealand’s employment legislation.
“As Chartered Accountants, we have the tools and knowledge to ensure payroll compliance—helping you avoid costly mistakes before they turn into criminal matters.”
Industry Reactions: Employers vs. Employees
Employer Concerns
- Many worry that the law doesn’t distinguish between deliberate theft and genuine mistakes.
- Business NZ warns that SMEs without HR teams may struggle with compliance (RNZ).
- National MP Katie Nimon argues the law may place undue pressure on already-stressed business owners.
Employee Support
- Advocates say the law finally protects vulnerable workers, especially in low-wage sectors.
How to Protect Your Business: A 5-Step Compliance Plan
Payroll mistakes can happen to anyone—but these steps will help safeguard your business:
- Review Your System
- Use reliable software (e.g. Xero, MYOB, PaySauce).
- Train staff on payroll best practices.
- Conduct a system check every quarter.
- Keep Accurate Payroll Records
Maintain wage, time, and leave records for at least 7 years.
Use digital time-tracking to minimise human error.
- Conduct Regular Payroll Audits
- Compare pay rates against employee agreements.
- Randomly check payroll transactions for inconsistencies.
- Engage your Chartered Accountant annually to conduct an external audit. They’ll identify risks that internal teams may overlook.
- Be Transparent with Staff
- Encourage employees to review payslips and report concerns.
- Resolve payroll errors quickly to prevent escalation.
- Stay Up to Date with the Law
- Subscribe to Business.Govt.NZ or MBIE updates.
- Attend payroll compliance webinars and workshops.
Final Thoughts: Compliance is No Longer Optional
New Zealand’s wage theft law is a wake-up call for business owners. What used to be a simple payroll oversight is now a potential criminal charge.
“I didn’t know” won’t protect you.
“It was a mistake” won’t shield you.
But you don’t have to navigate this alone.
If you don’t have the time or resources to conduct regular checks, partner with your Chartered Accountant. We’re here to help you stay compliant, avoid legal risk, and protect your employees—and your business.
Is Your Payroll System Compliant?
Download our Payroll Compliance Checklist—a step-by-step guide to safeguard your business from payroll mistakes and legal risk.
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