Paying Staff Under the Table?

Wakefields Lawyers understands the challenges that come with running your own business, particularly when you get busy enough to start thinking about taking on staff.

Employing your first staff member is an exciting time in the growth of your dream, although it can also be a huge challenge. Once you have employees, there are several requirements you need to meet from both an employment law and tax perspective.

Like most business owners, time is probably your most precious resource. It’s natural that not being able to make more of it makes us look for more efficient ways of doing things.

For some business owners, this can lead down the dangerous path of taking on staff “under the table” (i.e. paying them in cash, without deduction of PAYE and usually with no employment agreement in place) in an effort to “keep things simple”.

This is not lawful and the Employment institutions and IRD take a very dim view of businesses trying to get around their obligations when it comes to employees (and tax!).

In late 2019, this was highlighted by IRD when they conducted ‘raids’ on several South Island hospitality businesses as part of their hidden economy campaign. They seized computers and business records, including rosters, to check against employee details held by IRD. They discovered employees being paid under the table and cash sales (i.e. with no GST paid).

Not paying PAYE on your employee’s wages can lead to interest charges and penalties of up to 150% of the amount owed, not to mention possible prosecution by IRD, fines and even prison time.

The risk of paying staff under the table doesn’t end with IRD. From an employment law perspective, the employer may also be in breach of the Employment Relations Act if the employee doesn’t have an employment agreement and the Minimum Wage Act if the employee hasn’t been paid enough.

We cater to all types and sizes of businesses with our Employment and Commercial Law teams working side by side to make the complex simple. Give us a call on 04 970 3600 or email us on info@wakefieldslaw.com to see how working together is better for everyone.