As an employer, you are responsible for ensuring that all employees are always paid at least the minimum wage for every hour worked.
This can be difficult to manage without the right tools to help you – but PaySauce has a great top up feature to help you do this easily! We have multiple ways you can create automatic top ups depending on how you’d like recording your employee’s time and payments to work.
We get lots of questions about complying with minimum wage requirements, so we’ve compiled a few tips here to help you out.
How minimum wage is legislated
The overall legislation that governs minimum wage is the Minimum Wage Act 1983.
Each year, a new Minimum Wage Order is issued with updated rates that apply to payments over specific time periods.
Minimum wage legislation states that in each pay period an employee must earn at least minimum wage for hours worked. This is outlined in the Minimum Wage Order for each year.
Key requirements for compliance
All employees aged 16 and over must receive at least the adult minimum wage unless they qualify for the starting-out or training wage.
It doesn’t matter if they are full-time, part-time, or casual, or if they are paid hourly, by salary, commission, or piece rates: minimum wage laws still apply.
For employees paid a salary, their total pay divided by the actual hours worked in each pay period must not fall below the minimum wage. This includes time spent on overtime, meetings, or required opening/closing duties.
If you have a ‘total remuneration’ approach to KiwiSaver where you have agreed a rate of pay that includes your employer contribution, the employee must still earn minimum wage for every hour worked excluding the KiwiSaver portion, i.e. the KiwSaver employer contribution is not factored in when considering minimum wage entitlement. The same applies to an 8% holiday pay ‘pay as you go’ arrangement.
If your employee works on a public holiday and receives a time and a half payment for hours worked, earnings from the half time can’t contribute towards minimum wage requirements for the rest of the hours in the period.
You must keep accurate wage and time records to show compliance. These records must be available for Labour Inspectors if requested.
There is no minimum wage for employees under 16 (but they are still entitled to other employment entitlements, such as leave).
If you are paying employees a taxable accommodation or rent allowance, this is included as wages for the purposes of ensuring minimum wage compliance. There’s more on specifics for employers in agriculture here: Labour Inspectorate Position Statement
Period of time used to calculate minimum wage
As explained at the start of this blog, the Minimum Wage Order for each year sets out minimum wage rates for each new year.
The Minimum Wage Order also references explicit periods of time for ensuring minimum wage compliance. It outlines the minimum wage amounts for an employee paid by the day, week or fortnight. Therefore employers must ensure minimum wage is being met in these periods of time - if you have an employee paid fortnightly, you must ensure that the minimum wage requirements are met within that fortnight.
‘Time banking’ or giving employee lieu hours is a common practice but you still must ensure that the employee is receiving, in each pay period, at least the minimum wage for every hour they actually worked.
You cannot average over a longer period of time to meet minimum wage requirements.
Starting-out and training wages
There also tends to be a fair amount of confusion over when to appropriately apply starting-out and training wages. Here’s what you need to know:
The starting-out minimum wage applies when:
- The employee is 16 or 17 years old and has not worked for their current employer for 6 continuous months, or;
- The employee is 16 to 19 years old and their agreement states that they have to undertake industry training for at least 40 credits a year to become qualified in the area they are working in, or;
- The employee is 18 or 19 years old and they have been paid specified social security benefits for 6 months or more, and they have not worked for one employer for 6 continuous months since they started being paid a benefit.
The training minimum wage applies if:
- the employee is 20 years old or over, and
- their agreement states that they have to do at least 60 credits a year of an industry training programme to become qualified in their role - usually apprentices.
The training wage does not apply if your employee is being trained at work. The employee must be doing some approved industry training.
The starting-out and training wages do not apply if your employee is supervising or training other workers. They must be paid the minimum wage if they’re doing this.
Minimum wage compliance is a key part of your employment obligations. With the adult minimum wage now at $23.50 per hour (and $18.80 for starting-out and training wages), you must ensure all employees are paid at least these rates for every hour worked, regardless of how they are paid or their employment status. Keeping up with annual changes and maintaining good clear records are the keys to staying compliant.
If you want to make use of PaySauce’s Top Up feature, feel free to contact our Support team or check out our help centre articles on setting it up.
For further guidance, consult the official Employment New Zealand website or seek legal advice to ensure compliance with current employment laws. We highly recommend the eLearning modules available for employers from Employment NZ. Check them out here: https://employment.elearning.ac.nz/
As always, the information provided in this blog post is for general informational purposes only and does not constitute legal advice. Employment laws and regulations can change, and individual circumstances may vary. For advice specific to your situation, please consult a qualified legal professional or employment advisor.
