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For sometime, there has been confusion as to what can be included in minimum wage calculations so as to meet the requirements under the Minimum Wage Act 1983 (the Act). Many farmers offer their employee’s on farm accommodation and other benefits such as firewood, meat, wet weather gear and milk as part of their employment. Can you include benefits to make up any shortfall in the minimum wage (currently $14.25 an hour)?

In an effort to clarify the above, the Ministry of Business, Innovation and Employment (MBIE) has recently released a Position Statement that clarifies MBIE’s views and sets out how Labour Inspectorates will deal with accommodation and other goods and services in the agricultural industry, when ensuring that the requirements of the Act are met.

Deductions

Generally an employer must pay the entire amount of wages to the employee, without deduction. However, an employer can deduct monies from an employee with their written agreement. Example deductions include the provision of accommodation and other goods and services such as firewood and animals. In order to make these deductions, they must be agreed to in writing (ideally in the employment agreement), and the agreed price must be reasonable (or in the case of accommodation, market rent).

Can Accommodation and Benefits be included in Minimum Wage Calculations?

MBIE has confirmed that if a Labour Inspectorate comes knocking on your door and they are looking at whether the minimum wage is being paid they will treat accommodation and other goods and services as follows:

The agreed value of the accommodation will be included as wages for the purposes of calculating the minimum wage;
The agreed value of other non-cash benefits such as firewood and meat will not be included as wages for the purposes of calculating the minimum wage; and
Where expressly authorised by the employee, the employer may deduct the agreed cost of the benefits (eg. firewood and meat) from wages before they are paid and they will be included as wages for the purpose of calculating the minimum wage.
We remind you that it is vitally important to keep track of all hours worked and leave records for your employee’s. All wage records should include the wages payable to the employee before any deductions are made for the agreed value of the accommodation or other goods and services.

We recommend that you seek advice from your accountant as to the tax implications of deducting accommodation and other goods and services from wages.

Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations.  We recommend that you obtain legal advice specific to your situation before proceeding and would be happy to help in this regard.

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