Q: Can I please ask a question.I have been challenged by an employee re their IRD arrears and not being “consulted” before the deduction is made.

I have pointed out our legal obligation to deduct this, and the fact the letter also quotes that “your employee has been sent a notice showing their relevant information”.

He is arguing that we are in “violation”of the wages protection act.
I rang my contact at IRD and they confirmed that under section 157 of the Tax Administration Act, we don’t need to gain their consent or advise them if the deduction, but just process the deduction. I wasn’t able to locate a specific clause though.

I then looked up NZPPA practice guide and see on page 225 (2022 edition, it quotes that government departments and agencies making deductions against an employees wage or salary, are exempt under the WP Act and no employee consent is needed.

He is not disputing the deduction being legally required to be made, he is disputing that we did not warn him of this. To be honest, I’m all organisations I have worked for, we have never sent a email confirming the deduction for tax arrears or court deductions.
Do you have a view on this, or anything I can send back to him?

A: I take it the employee has looked at the EmploymentNZ website:

The Wages Protection Act 1983 sets out the way wages must be paid, and prevents unlawful deductions from wages. Employers can make a deduction from pay if:

• the deduction is specifically required by law, for example, PAYE tax, student loan repayment, child support
• the deduction is for a lawful purpose, is reasonable and the employee has agreed to or asked for the deduction in writing. ‘Agreed in writing’ includes a general deductions clause in the employment agreement, but an employer must consult with the employee before they make a specific deduction under a general deductions clause. The employee can vary or withdraw their written consent to a deduction by giving notice in writing at any time. The employer must then vary or stop the deductions within two weeks of receiving the notice or as soon as practicable

Reference: https://www.employment.govt.nz/hours-and-wages/pay/deductions/

This is not a role or requirement of payroll to undertake.  The relationship is between the department/agency and their client.  The employee has misunderstood the application of the Wages Protection Act in this regard.

“The employer must consult” is not about informing the employee about deductions specifically required by law (IRD, Courts etc) as the various acts that these departments or agencies work under detail how they are to inform their client directly.  Payroll’s role in this is to act on the instruction of the department or agency.  It would be inefficient and could create additional issues and confusion as payroll is not party to all communication between the employee the department and agency they are dealing with.  It could mean information is provided to an employee by payroll that is out of date or has changed since being provided to payroll.

It is important that the employee takes responsibility if they know they have a deduction from a department and agency and actively keep in communication with them, so deductions are known as they are applied (for example logon to myIR).