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Ensuring Minimum Wage To Employees

The dairy industry has come under recent scrutiny after a Stratford farmer was prosecuted for under paying an employee, and a Ministry of Business, Innovation and Employment (MBIE) survey found a third of Southland dairy employees were potentially being underpaid.

The survey discovered issues with employers failing to keep accurate time and wage records, and the practice of seasonal averaging resulted in employees receiving less than the minimum wage during busy times of the year.

By law, employees must be paid at least $13.75 per hour for every hour worked.

The practice of seasonal averaging refers to the practice of averaging pay over a year. The employees are on salaries, and receive the same income regardless of hours worked each week. The staff may work longer hours over calving and spring, but less hours during summer.

In the Stratford case, an employee on a $32,000 salary was working 49-60 hour weeks, and 38-44 hour weeks after the cows had dried off. This resulted in the farmer being ordered to pay the employee an additional $6,473.77.

The Employment Relations Authority held that paying a salary could not be used as a mechanism to avoid paying minimum wage.

Over the busy spring period where employees are working 60 plus hour weeks, the pay per hour may fall below the legal minimum of $13.75, even though the average annual pay per hour exceeds the minimum wage.

If an employee works 60 hours a week, then MBIE believes they must be paid at least minimum wage for each hour worked, regardless if they are waged or salaried.

 From a practical viewpoint, there are many good reasons for seasonal averaging. It provides employees with a regular consistent cash flow, rather than having fluctuating wages caused by busy and quiet times in the season. The PAYE calculations are also easier for the farm owner and payments can be made by automatic payment.

One way of avoiding employees receiving less than minimum wage is for them to be paid an hourly rate rather than a salary. The seasonal averaging effects only those who are on low income salaries, so a pay increase may be required if salaries are to be paid instead of wages. But farmers would find the compliance time for this as onerous.

When calculating an employee's annual remuneration, care needs to be taken to ensure that the market value of any accommodation provided by the farmer is included in calculating gross wages. MBIE are arguing that this should not be included

While this is mainly seen as a dairy industry problem, similar problems may arise for sheep farmers during shearing, and harvest or picking time for those involved in cropping, horticulture and viticulture.

The NZICA Regional Advisory Group are meeting with Federated Farmers and MBIE to try to work a practical way forward for this issue.

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