The union for Cotton On Group workers in New Zealand says the Australian retailer is "intentionally" withholding wages from its staff.

First Union says the retail company which operates Cotton On, Cotton On Kids, Cotton On Body, Factorie, Ruby, Typo and Supre stores has not being paying its staff correct holiday pay and "altering staff time sheets to fit their budget".

However, Cotton On refutes First Union's claims.

"As a people first business, the Cotton On Group entered into negotiations with First Union in good faith and have put forward an offer that benefits our team," Kerry Ashford, Cotton On Group country manager, said in a statement.

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"We are disappointed we have not reached an agreement with the Union, however we're committed to the mediation process."

The union says it would be taking legal against the company within the next couple of weeks.

"We first entered this company about four or five years ago, and at the time we realised that they weren't paying annual leave correctly; they weren't paying public holidays or sick leave," First Union spokesman Jared Abbott said.

"We went through an auditing process and they paid out $80,000 in under payments back to staff in conclusion to that, then a year after that in 2016 we audited the company again against the employment contracts because a lot of people were complaining that they weren't being paid correctly in allowances and overtime, and again another $35,000 was found that the company had to pay out.

"This year we started auditing again to see if the company had changed their ways and sure enough they are doing the exact same thing. Across the country we have complaints."

When the Herald put the specific allegations to Cotton On, Ashford said:

"We do not agree with what First Union has said about the Cotton On Group in its media statements."

Abbott said Cotton On had known about the pay discrepancies since February but had not back paid staff what was owed. Management had acknowledged the discrepancies, he said, but had made excuses as to why it had not paid the arrears.

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"It's a huge amount of wage theft and I wouldn't be surprised if it is in the hundreds of thousands of dollars - it seems appalling for a company of this size that is in a period of expansion and very good profits."

Cotton On workers in the company's distribution centre close to Auckland Airport have voted to take strike action in favour of a Living Wage after bargaining bids fell through.

About 65 staff work in the centre, of which 63 are First Union members.

Strike action would likely disrupt the rollout of the retailer's new spring season stock making it into stores, Abbott said.

The union was negotiating for a national collective agreement that covers both distribution centre and retail sales staff, he said.

"There's currently a clause that says no one will be paid less than 3 per cent above the minimum wage and the company's ... once April comes these workers will actually end up on minimum wage."

The standard rate for Cotton On staff in the distribution centre is between $18-19, he said. The union is seeking an increase to $21.15 as a minimum rate.

Abbott said the union was in the process of finalising an audit of staff wages and would be tacking legal action over underpayments next month.

He said Cotton On managers walked out on a bargaining meeting last week and during the meeting told First Union that they "'weren't in the mood'" to sort out staff wage under payments.

The union anticipates under payments effects hundreds of workers. It said it had received complaints from staff working in all of the company's retail brands.