Farmers throughout New Zealand have been put on notice to ensure they are complying with minimum employment rights. The reasons being;
- The historical practice of paying a salary to farm workers to account for the averaging of peaks and troughs of hours worked over a season, is now unlawful.
- Any practice of averaging out pay across a season, especially for those earning low salaries, is likely to breach the minimum wage rates set in legislation.
Farmers have been warned that appropriate enforcement action will be taken should any breaches of employment law be identified, with non-compliance attracting fines of up to $10,000 for any individual and $20,000 for a company.
In a determination released in September 2013, the ERA found that payment by way of salary cannot be used as a mechanism to avoid paying the minimum wage, as those workers may be vulnerable working long hours that do not equate to each hour, day or week paid meeting the minimum wage.
Subsequent to that determination, the minimum wage order has been changed to include a fortnightly minimum wage rate.
- The labour Inspectorate is visiting farms focusing on:
- Ensuring employees are receiving at least the minimum wage for the hours, days and weeks actually worked.
- Ensuring that farmers are maintaining accurate time, wage, holiday and leave records.
- Employment status - is this correct? (i.e. permanent, fixed term or casual)
- Employment agreements - are they legally compliant and contain all necessary clauses?
- Payroll calculations - these must be validated by recorded information.
The Minimum Wage
The adult minimum wage applies to all employees aged 16 and over who are not starting-out workers or trainees, and all employees who are involved in supervising or training other employees. The minimum wage rates are reviewed every year. The current adult minimum wage rates (before tax) that apply for employees aged 16 or over are $14.75 an hour, which is:
- 118 for an 8 hour day or
- $590 for a 40 hour week or
- $1180 for an 80 hour fortnight
Minimum Wage Order: The Averaging Process in Summary
When an employee is on a weekly, monthly or annual salary, then the period across which any minimum wage averaging can take place is a fortnight. When longer hours are worked in certain fortnights then this will need to be reconciled against the amount paid and possibly a top-up of wages is required. However, that reconciliation must take place fortnightly. Conversely, where fewer hours are worked in certain fortnights then the salary is not affected.
Where accommodation is available for the worker, any allowance paid may be included as part of the total gross remuneration, which has the effect of increasing the hours that can be worked in any one fortnight without breaching the minimum wage. A deduction is then made from the net payment for that fortnightly rent payment. The simple provision of a house, and taxing the value of that benefit is not counted as paid income despite having the same economic effect. It is necessary to gross up the person’s pay for the accommodation value, calculate tax on the gross amount of remuneration, then deduct the net amount from the employee’s pay as rent.
Other cash benefits (e.g. firewood, beast, etc.) may also be included as “wages” for Minimum Wage Act calculation purposes. Such benefits (accommodation included) must be appropriately valued with the net amount deducted from the employee’s pay as a purchase.
Leave entitlements may be quite different, depending on the employment status. For permanent employees (either full-time or part-time), the employee is entitled to annual holidays in accordance with the provisions of the Holidays Act 2003. In summary, the employee is entitled to four weeks’ annual holidays on pay for each complete 12 months’ continuous employment with the employer. A formula is available to use when determining the quantum of annual holidays, for those farm employees working on a rostered basis. Essentially, the questions must be asked “what is a week?”.
Farmers have historically entered into most employment relationships with farm workers on a season by season basis (1 June to 31 May, to coincide with the dairy farming season) and deemed workers to be fixed-term employees. This is not correct and is in fact an illegal practice. Farming operations are seen as enduring, therefore, there is no valid or genuine reason to consider such employment relationships as fixed-term.
So, what does this mean for you?
Farm workers employed for a period of a year are considered permanent and must be offered a permanent individual employment agreement. The only options available for ending that employment relationship are:
- Their voluntary resignation,
- Forced medical retirement (through not being able to fulfil expectations of the role),
- Redundancy (no requirement to keep that farm worker on), and
- Dismissal (after following robust disciplinary process).
Of course, any permanent employees are eligible to receive all leave entitlements as per the Holidays Act 2003 (e.g. annual, sick, bereavement, and parental).
However, genuine reasons to offer fixed-term employment to a farm worker might be:
- Assisting milking during spring period,
- Assisting with calf rearing during spring period,
- Assisting with harvesting of crops, and
- Any project based activity with defined start and finish dates.
Check your records to ensure that an employment agreement not only exists for each farm worker, but is the correct type of agreement and the contents reflect fully and accurately, current employment legislation.
Warning: You are expected to fully understand and comply with your employment obligations. Ignorance for failing to comply is not an acceptable explanation.
If you, or anyone you know, would like to have any of the following reviewed:
- Individual employment agreement,
- Compliance with employment legislation,
- Wage and salary payment processes,
- Wage, time, holiday and leave records,
then please do not hesitate to contact our HR Employment and Compliance Specialist Kearin Pollard on 06 757 3155 or email him at email@example.com.