With the adult minimum wage increasing on 1 April 2021, it’s timely for farmers and others in the agricultural sector to ensure employees are paid at the correct rate. Erin Anderson, an Associate with Norris Ward McKinnon (Federated Farmers legal partners), outlines the obligations….
An employer must pay its employees at least the relevant minimum wage set under the Minimum Wage Act 1983 (MWA).
Employers need to be careful with salaried workers who work additional hours during peak seasons (such as calving). This is because employees must be paid at least the minimum wage for each hour worked regardless of whether the employee is waged or salaried.
The Employment Relations Authority has found that paying a salary does not mean employers can avoid paying minimum wage. An example of this is where employees are working, say, 60 hours per week and their pay per hour may fall under the minimum wage. This can be a breach of the MWA even though the employee’s average annual pay per hour exceeds the minimum wage. Seasonal averaging generally only affects employees who are on relatively low salaries, and it may be worth considering whether to change affected employees to wages to avoid MWA issues.
Average hourly rates are calculated over each pay period. Ideally, pay periods should align with the employee’s roster. For example, if an employee is on a 12 on 2 off roster, paying fortnightly will be a more accurate reflection of calculating minimum wage, than paying weekly.
It’s the employer’s obligation to keep accurate wage and time records. However, the reality is that employees often need to be responsible for completing timesheets and this should be set out in an employment agreement or policy.
There are three types of minimum wage:
- Adult minimum wage – $18.90 an hour before tax (rising to $20.00 an hour on 1 April 2021);
- Starting out minimum wage – generally employees who are under 18 years of age and have not been with their employer for more than 6 months; or
- Training minimum wage – employees who are 20 years of age or older and under their employment agreement must do at least 60 credits a year of industry training.
In certain industries (farming in particular), accommodation (i.e., a service tenancy) can be included in an employee’s remuneration package. However, care should be taken to ensure that the market value of any accommodation is agreed and that rent is deducted from the employee’s remuneration. Issues can arise where the value of deductions increase (such as rental amounts), and this can cause the employee’s average hourly rate to dip below minimum wage.
Non-compliance with the above can result in a fine of $10,000 for individuals and $20,000 for companies.
Minimum entitlements can be a complex area of law to navigate and are regularly changing. If you have any questions, please don’t hesitate to get in touch with one of the team at Federated Farmers who will be able to assist in directing your query.