First, an explanation. What's a "Minimum Wage Top Up", anyway? Short answer is, it's applying a bit of extra dosh to a salaried worker's payslip to make sure they're getting minimum wage for every hour they've worked.
But wait - why are we talking about people on salaries getting minimum wage? They're not hourly, right?
Sometimes, a salaried employee might work so many hours that their hourly pay effectively slips below minimum wage. This happens in extremely seasonal industries, where work hours fluctuate like west coast weather. So during "low" periods, their salary works out to be a pretty generous rate, but during the "high" season, it gets stretched too thin over a massive number of weekly hours. Traditionally, employers took the position that this "averaged out" fairly, but in recent years, MBIE has made it very clear that all staff must receive the minimum wage for every hour worked.
The prime example of this is the dairy industry, where sharemilkers are typically employed on yearly contracts, with a salary. This puts dairy employers in the nervous position of trying to ensure that staff are still over the minimum rate during their busiest time.
So these employers need a system to help them work out when an employee's hours have gone high enough to bring them below minimum wage. This is done automatically for PaySauce customers, but you can also do it manually. Sharpen your pencils and get your calculator out, because we're about to do a little math.
Take the fortnightly (or weekly) salary (gross taxable portion) and divide by the minimum rate (currently $17.70). Let's say the employee is on a $52,000 salary, getting $1,000 a week. Your equation would be:
1000 / 17.70 = 56.49
So, they can work 56 and ½ hours that week before they're due a top up. Those are the "safe" hours.
Now to top them up, take the total number of hours they worked during that period and subtract the safe hours. Say they worked 63 hours:
63 - 56.5 = 6.5
There are 6.5 hours that need to be "topped up".
6.5 × 17.70 = 115.05
Your employee needs an extra $115.05 to keep you minimum wage compliant.
The law says the longest period you can use for this calculation is two weeks, so even if you pay monthly, you need to make sure that each hour is paid at minimum wage across every fortnightly period. Oh yeah, don't forget to update your calculations when the minimum wage increases!
How does an accommodation allowance affect the top up?
The accommodation allowance is added to the employee's salary, and the top up is worked out after that. The equation is:
salary + accommodation / 17.70 = hours
Watch Mark Leishman & Asantha Wijeyeratne discuss minimum wage top-ups.
Unders and Overs
Farming people will likely be familiar with the idea of time banking. This is where an employer slices off a few hours from a massive work week and turns them into lieu leave, so an employee can either take them as time off later or be paid out for them. As an employer, this gives you a more consistent cash flow.
For waged workers, this provides a more reliable income, rather than a hefty payment during busy weeks, and hardly anything during slow times. Giving your staff flexibility to help with budgeting - what could be wrong with that? Well, as far as meeting minimum wage, that's all above board. However, if you're keeping inaccurate records as a result, this could get you into trouble. Your records must reflect the hours your employee actually worked. Also, bear in mind that if you're paying "banked" hours further down the line, you'll be paying them at your employee's current rate, which may have increased by then.
But banking time the wrong way can get you into seriously hot water. There are some employers who have used the calculation above, and figured out that their salaried employee can work, say, 70 hours a week before they need to be topped up to minimum wage. So they might keep an eye out, and when their employee works 76 hours, they shave off the extra 6, "bank" them, and tack them on to a quiet week during the low season. That way, the employee's salary doesn't need any topping up. This one is pretty clear-cut - it's a no-no! Manipulating records to avoid paying the minimum wage for every pay period is not on. You may have been doing it for decades, but if MBIE catch you with your hand in the cookie jar, they'll confiscate a lot of cookies. You could be paying out $10,000.
While we've got you...
Speaking of heavy workloads, here's a quick reminder: DairyNZ recommends that wherever possible, your people:
- Don't usually work more than 50 hours per week or 10 hours a day
- Don't usually work more than four hours in any day before a break is taken
- Have regular days off, set by the roster system
- Have at least two consecutive days off
For a bit more info on minimum wage compliance, check out this the MBIE site on paying minimum rate for agri employers, or their minimum wage position statement for agri.
Check out more details on the PaySauce Minimum Wage Top-Up feature.
Got an idea about how we could make compliance easier for you? Get in touch! Send through an email to firstname.lastname@example.org and we'll try to build what you need.
Got questions about minimum wage or PaySauce? Give us a call on 0800 746 700.