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 salary.
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 records.
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.