Are you aware that you have an obligation to ensure at least the
minimum wage is paid to your salaried employees?
Many employers assume that the requirement to pay the minimum
wage does not apply where an employee receives a salary. However, a
recent Employment Relations Authority decision makes it clear that
this requirement applies whether employees are paid a wage or
This issue is particular relevant to farmers and other employers
who have employees that work varied hours during the year.
A farmer in Stratford argued that his salaried employee was paid
at least the minimum wage when he averaged out the number of hours
the employee worked over a year. The employee was paid a salary of
$32,000 and worked 38 - 44 hours per week during the dry season and
49 - 60 hours per week during the rest of the year.
The Employment Relations Authority found that during the dry
season and for those weeks where the employee worked 49 hours per
week he was paid at least the minimum wage rate applicable at that
time. However, the farmer was ordered to pay the difference between
the weekly salary received by the employee and the relevant weekly
minimum rate for the hours worked by the employee during the rest
of the year.
The farmer could not average out the number of hours worked by
the employee over the year. His employment agreement provided that
he would be paid on a weekly basis and so his employer had to
calculate whether he was paid at least the minimum wage at the end
of each week.
To ensure you avoid the same fate you must keep accurate records
of the hours worked by all your employees. At the end of each pay
period you will need to check whether the salary paid to the
relevant employee equates to at least the minimum wage for the
hours worked. If not, you need to make an additional payment to the
employee to ensure they receive at least the minimum wage. The
current minimum wage rate for adult workers is $13.75 per hour.
All employers have a legal obligation to keep wages and time
records for each employee including (amongst other things) the
hours worked, the days worked, wages or salary paid to the employee
for each pay period and a description of how their pay was
calculated. Employers also have a similar obligation to keep
holiday and leave records. Employees can request you provide them
with a copy of these records which relate to them.
In addition to receiving a potentially hefty demand for back pay
where a salaried employee has not been paid minimum wage, your
business could be liable for penalties of up to $10,000 if the
employer is an individual or $20,000 if the employer is a company,
for failing to pay minimum wage or to keep the required
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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