Employers warned against illegal pay cuts


An employer has been ordered to repay six workers after reducing their salary to 80 per cent without legal consultation

Eastern Bays Hospice Trust, operating as Dove Hospice, was ordered to repay money owed to six workers after it unilaterally reduced workers’ salary to 80 per cent before making them redundant.

The Employment Relations Authority (ERA) determined the pay deductions were not agreed to by the workers and were therefore not legal. This has prompted a reminder from the Labour Inspectorate to employers of the need to follow legal procedures when making changes to workers’ pay or other agreed terms and conditions.

Employment New Zealand National Manager George Mason says employment law continues to apply to all employment relationships. This includes anything that has been agreed to in an employment agreement.

“We understand that many workplaces will need to make changes to adapt to and recover from the impacts of COVID-19. These changes can include different ways of working, varying hours or days of work, and in some cases, changes to the rates of pay.

“What employers need to remember, however, is that all changes need to be recorded in writing and employees need to be consulted in good faith and given the opportunity to consider and agree to these changes. In any situation, pay cannot be reduced below the minimum wage of $18.90 per hour. Failure to follow these rules may lead to legal action and penalties.

“Likewise, employees need to discuss and raise any issues, concerns or changes to their circumstances with their employer as soon as they can.

“In these challenging times, it is more important than ever for employers and employees to work together,” Mr Mason says.


Helpful Links

Coronavirus: What businesses need to know

Modifying employment agreements: Information on legally making changes to employment agreements can be found on the Employment New Zealand website.

Mediation: Where the employer and employee cannot agree, MBIE offers a free, independent mediation service. Parties are encouraged to seek help early, before the working relationship is damaged beyond repair.


Employment New Zealand