Farmers - are you accidentally paying your employees below minimum wage?

Farming is seasonal; it is a business that creates the need for employees (with their agreement) to work additional hours at different times of the year. When requiring employees to work those additional hours, farmers need to ensure compliance with the Minimum Wage Act 1983, which cannot be contracted out of.

This Act requires all employees to be paid at least the minimum wage for all hours worked within each pay period regardless of whether they are paid hourly or receive an annual salary.

All employees aged 16 years and over must be paid at least the adult minimum wage with some exceptions. On 1 April 2021, the adult minimum wage increases from $18.90/hour to $20.00/hour.

Legal requirement to keep accurate records

Employers are required by law to keep accurate time, wage and holiday records for employees. Requiring employees to complete timesheets is one way to keep track of hours worked against the employee’s remuneration package and ensure compliance with the law.

Salaried workers

Many employees in the agricultural sector now receive an annual salary. Farmers need to be conscious of how many hours salaried employees can work before they hit the minimum wage thresholds. Whilst salaried hours to be worked should be in each employment agreement; if the agreement doesn’t have the salaried hours stated, then the salary earned by the employee must still be equal to or higher than the minimum wage for each hour worked.

Top-up payments

If an employee works more hours than the relevant threshold, then their employer needs to make a top-up payment to the employee at the end of the relevant pay period. It is important to note that “averaging” hours is only permitted over a week or fortnightly depending the pay period. For employees paid less frequently than fortnightly (e.g. monthly) averaging hours is capped at a fortnight. It is illegal to average hours over a season. For example, an employee on an annual salary of $45,000 paid fortnightly has a threshold of 86 hours per fortnight before they must be paid a top-up payment (i.e. $45,000 / 26 / $20 = 86 hours/fortnight). If this employee works 110 hours in a fortnight, they must receive a top up payment for the additional 24 hours paid at the minimum wage.

Accommodation included

Where it has been agreed that the employer will provide accommodation, the agreed value of the accommodation forms part of the employee’s gross salary or wages and is included for the purposes of minimum wage calculations.

Non-cash benefits

Where with the employee’s agreement the use of farm property, firewood or meat are provided by the employer as non-cash benefits, they cannot be considered as part of the employee’s remuneration when determining whether the minimum wage is being paid; however if provided as cash-benefits, they can be included.

Employees can recover payment

Where there has been a default in payment by the employer for the additional hours or payment was less than the applicable minimum wage, employees can seek to recover payment in the Employment Relations Authority and have six years from when payment was due to do so; regardless of whether the employee agreed or accepted the lower rate or non-payment at the time.