FAQ: I Think I Have Been Underpaid...What Can I Do?

Getting paid properly is one of the most basic rights at work. But underpayments happen more often than many employees realise. Sometimes it is a genuine payroll mistake. Other times, it is caused by employers misunderstanding employment law, failing to keep proper records, or cutting corners.

If you think you have been underpaid, do not ignore it. Small errors can add up over months or years, especially when overtime, public holidays, annual leave, or final pay are involved.  The good news is that New Zealand employment law gives employees strong protections. In many cases, underpayments can be fixed quickly once the issue is raised properly.

What Counts as an Underpayment?

An underpayment happens when you receive less than what you are legally or contractually entitled to.  That might include:

• Not being paid the minimum wage,

• Missing overtime payments,

• Incorrect public holiday pay,

• Annual leave being calculated wrongly,

• Missing commissions or bonuses,

• Unpaid training or trial periods,

• Incorrect final pay when employment ends,

• Missing KiwiSaver contributions, or

• Unpaid hours worked before or after shifts.

Sometimes the issue is obvious. Other times, employees only discover problems after comparing payslips, changing jobs, or talking with co-workers.

How do I know if I have been underpaid?

Employees often notice problems when their pay seems inconsistent, payslips do not match the hours they have worked, public holiday pay looks lower than expected, leave balances seem wrong, final pay is smaller than expected, or overtime is unpaid or paid at the normal rate. If something does not look right, trust your instincts and check it.  Your employment agreement is usually the best starting point.  Look for clauses about:

• Hourly pay or salary

• Overtime rates

• Public holiday entitlements

• Leave calculations

• Availability requirements

• Commission or bonus structures

• Final pay arrangements

Some employees assume they are not entitled to overtime because they are salaried. That is not always true. It depends on the wording of the agreement and how the work is actually performed.  Even if your contract says you must work ‘reasonable additional hours,’ there can still be problems if the unpaid hours become excessive or push your effective hourly rate below minimum wage.

Four Common Examples of Underpayment

These are four of the most common areas where underpayment can occur.

Underpayment of Overtime

Overtime disputes are extremely common.  In New Zealand, employers do not automatically have to pay a higher overtime rate unless the employment agreement says so. However, employees must still be paid for all hours worked.  This means problems can arise where:

• Employees are expected to start early or finish late without pay

• Staff work through breaks

• Workers are asked to take work home

• Salaried employees work very long hours

• Time spent opening or closing workplaces is unpaid

For example, if a salaried employee regularly works 60 hours per week, their actual hourly rate may fall below minimum wage once those extra hours are taken into account.  That can become a serious legal issue for the employer.

Public Holiday Underpayments

Public holiday pay rules are complicated, and many employers get them wrong.  If you work on a public holiday that would otherwise be a working day for you, you are generally entitled to time and a half for the hours worked, and an alternative holiday (sometimes called a day in lieu).  Employees are also usually entitled to be paid for public holidays they would normally have worked, even if they did not actually work that day.  Problems often happen when employers:

• Use the wrong daily pay calculation

• Fail to provide alternative holidays

• Misclassify working days

• Ignore casual work patterns

• Pay ordinary rates instead of time and a half

Shift workers and employees with irregular hours are especially affected by payroll mistakes involving public holidays.

Annual Leave Underpayments

Annual leave calculations can become surprisingly technical.  Under the Holidays Act, annual leave is generally paid at the greater of ordinary weekly pay, or average weekly earnings.  Some employers incorrectly use only one method when they should compare both. Annual leave problems are especially common where employees:

• Work variable hours

• Earn commissions or incentives

• Receive allowances

• Work overtime

• Change hours regularly

Even small calculation errors repeated over several years can lead to substantial underpayments.

Final Pay Mistakes

Employees often discover underpayments when they leave a job.  Final pay should usually include:

• Outstanding wages or salary,

• Unused annual leave,

• Alternative holidays owing,

• Public holiday entitlements, and

• Any other contractual payments owed

Common problems include unused leave being calculated incorrectly, alternative holidays/time off in lieu being missed, incorrect deductions, missing notice payments or final pay being delayed. Do not assume your final payslip is correct just because employment has ended.

What should I do if I think I have been underpaid?

Gather records

Before approaching your employer, collect as much information as possible.  Helpful records include:

• Employment agreement

• Payslips

• Bank statements

• Timesheets

• Rosters

• Leave records

• Emails or messages about hours worked

• Screenshots of schedules or clock-in systems

Keep your own timeline of what happened and when.  The clearer your records are, the easier it becomes to identify whether an underpayment exists.

Raise the Issue Calmly and Professionally

Many underpayment issues can be resolved without formal legal action.  Start by raising the concern directly with your employer or payroll department.  Keep the discussion calm, factual, and professional.  You could say something like:

“I’ve been reviewing my pay and I think there may be an issue with how my overtime/public holiday/leave payments have been calculated. Could we please review it together?”

Avoid making accusations immediately unless there is clear evidence of deliberate wrongdoing.  Sometimes employers genuinely do not realise there is a problem.

Put Concerns in Writing

If verbal discussions do not resolve things, put your concerns in writing.  An email creates a record of what issue you raised, when you raised it, and what response was given.  Be specific about the dates involved, the payments you believe are incorrect, the amount you think may be owing, and provide any supporting documents.  Clear communication often encourages employers to take the issue seriously.

Don’t put it off

It is important if you are concerned about your pay that you do not wait too long to act.  Employment claims can become harder over time because:

• Records disappear

• Witnesses leave

• Payroll systems change

• Legal limitation periods apply

The earlier you raise concerns, the easier it usually is to resolve them.  

Keep calm and carry on

Even if you are frustrated, try to remain professional at work while the issue is being addressed.  Avoid walking off the job, refusing work suddenly, aggressive confrontations, and posting accusations online. Poor reactions can complicate otherwise strong claims.  Focus on documenting the issue properly and following the correct process.

What If My Employer Refuses to Fix It?

Unfortunately, not every employer responds appropriately.  Warning signs that it might not be straightforward include ignoring your concerns, refusing to provide records, threatening your job, cutting your shifts, becoming hostile after questions are raised, and pressuring you not to complain. Employees are legally protected from retaliation for raising employment issues in good faith.  If the situation becomes difficult, it may be time to seek outside help.

When Should I Get Legal Help?

You should consider getting advice when large amounts of money may be involved, the underpayment has gone on for a long time, your employer is denying there is a problem, records are missing, multiple employees are affected, you are facing retaliation, or you have already tried resolving it internally. Employment advocates, and unions can help assess whether you have a legal claim.  In some cases, employers may owe thousands of dollars in backpay.

The Labour Inspectorate can also investigate breaches involving minimum wage, holiday pay, leave entitlements, wage records, and employment standards. Labour Inspectors have significant powers and can require employers to produce records.  Serious breaches can lead to penalties against employers.  However, the Labour Inspectorate may not investigate every individual dispute, particularly where the issues are complex or heavily disputed.

FAQs

Can my employer punish me for questioning my pay?

No. Employees have the right to raise concerns about wages and entitlements. Retaliation may create separate legal claims.

How far back can underpayment claims go?

That depends on the circumstances, but underpayment claims can sometimes go back several years.

What if I do not have payslips?

Employers are required to keep wage and time records. You can request copies.

I am salaried. Can I still be underpaid?

Yes. Salaried employees can still have minimum wage or overtime-related issues if excessive unpaid hours reduce their effective hourly rate.

What if everyone at work is affected?

That may indicate a wider payroll or compliance issue. Multiple employees raising concerns together can sometimes strengthen the pressure on an employer to investigate properly.

Can I be forced to work unpaid overtime?

Usually no. Whether additional hours are required depends on your employment agreement and whether the expectation is reasonable.

What happens if my employer admits the mistake?

Many employers will correct the issue by paying arrears, updating payroll systems, and adjusting future payments.

Do I need a lawyer?

Not always. Some issues can be resolved directly. But legal advice becomes important where the dispute is serious, complicated, or affecting your employment relationship.

If you think something is wrong with your pay check your records (including your employment agreement), raise the issue professionally, keep written evidence of your pay and any discussions you have about it.  If things are not resolved in a timely or acceptable manner, get help from a legal expert.  

Many employees stay silent because they worry about conflict or losing their job. But asking to be paid correctly is not unreasonable, it is a basic workplace right.  The sooner concerns are raised, the easier it usually is to fix the problem before it grows into something much bigger.

If you are concerned that you have been underpaid and your employer is not addressing the issue, get in touch for a free consultation.  MathewsWalker.co.nz | 0800 612 355

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Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered legal advice. While we strive to keep the information accurate and up to date, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained on the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. For specific legal advice tailored to your situation, please contact a qualified legal professional.